Correlation Between AMERICAN FUNDS and B of A

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Can any of the company-specific risk be diversified away by investing in both AMERICAN FUNDS and B of A 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 AMERICAN FUNDS and B of A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMERICAN FUNDS 2015 and Bank Of America, you can compare the effects of market volatilities on AMERICAN FUNDS and B of A 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 AMERICAN FUNDS with a short position of B of A. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMERICAN FUNDS and B of A.

Diversification Opportunities for AMERICAN FUNDS and B of A

  Correlation Coefficient

Poor diversification

The 3 months correlation between AMERICAN and B of A is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding AMERICAN FUNDS 2015 and Bank Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of America and AMERICAN FUNDS 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 AMERICAN FUNDS 2015 are associated (or correlated) with B of A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of America has no effect on the direction of AMERICAN FUNDS i.e., AMERICAN FUNDS and B of A go up and down completely randomly.

Pair Corralation between AMERICAN FUNDS and B of A

Assuming the 90 days horizon AMERICAN FUNDS is expected to generate 29.88 times less return on investment than B of A. But when comparing it to its historical volatility, AMERICAN FUNDS 2015 is 3.24 times less risky than B of A. It trades about 0.0 of its potential returns per unit of risk. Bank Of America is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,706  in Bank Of America on September 4, 2022 and sell it today you would earn a total of  902.00  from holding Bank Of America or generate 33.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

AMERICAN FUNDS 2015  vs.  Bank Of America

 Performance (%) 
AMERICAN Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FUNDS 2015 are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, AMERICAN FUNDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AMERICAN Price Channel

Bank Of America 
B of A Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish basic indicators, B of A may actually be approaching a critical reversion point that can send shares even higher in January 2023.

B of A Price Channel

AMERICAN FUNDS and B of A Volatility Contrast

   Predicted Return Density   

Pair Trading with AMERICAN FUNDS and B of A

The main advantage of trading using opposite AMERICAN FUNDS and B of A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMERICAN FUNDS position performs unexpectedly, B of A 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 B of A will offset losses from the drop in B of A's long position.
AMERICAN FUNDS vs. Bank Of America
The idea behind AMERICAN FUNDS 2015 and Bank Of America 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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