Correlation Between B of A and American Fds

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Can any of the company-specific risk be diversified away by investing in both B of A and American Fds at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining B of A and American Fds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Of America and American Fds 2015, you can compare the effects of market volatilities on B of A and American Fds and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in B of A with a short position of American Fds. Check out your portfolio center. Please also check ongoing floating volatility patterns of B of A and American Fds.

Diversification Opportunities for B of A and American Fds

  Correlation Coefficient

Very weak diversification

The 3 months correlation between B of A and American is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and American Fds 2015 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Fds 2015 and B of A is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bank Of America are associated (or correlated) with American Fds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Fds 2015 has no effect on the direction of B of A i.e., B of A and American Fds go up and down completely randomly.

Pair Corralation between B of A and American Fds

Considering the 90-day investment horizon Bank Of America is expected to generate 1.7 times more return on investment than American Fds. However, B of A is 1.7 times more volatile than American Fds 2015. It trades about 0.18 of its potential returns per unit of risk. American Fds 2015 is currently generating about 0.27 per unit of risk. If you would invest  3,587  in Bank Of America on August 28, 2022 and sell it today you would earn a total of  183.00  from holding Bank Of America or generate 5.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Bank Of America  vs.  American Fds 2015

 Performance (%) 
Bank Of America 
B of A Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, B of A may actually be approaching a critical reversion point that can send shares even higher in December 2022.

B of A Price Channel

American Fds 2015 
American Performance
0 of 100
Over the last 90 days American Fds 2015 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Fds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

B of A and American Fds Volatility Contrast

   Predicted Return Density   

Pair Trading with B of A and American Fds

The main advantage of trading using opposite B of A and American Fds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A position performs unexpectedly, American Fds can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Fds will offset losses from the drop in American Fds' long position.
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The idea behind Bank Of America and American Fds 2015 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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