Correlation Between Bank of America and Principal Lifetime
Can any of the company-specific risk be diversified away by investing in both Bank of America and Principal Lifetime 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 Bank of America and Principal Lifetime 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 Principal Lifetime Hybrid, you can compare the effects of market volatilities on Bank of America and Principal Lifetime 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 Bank of America with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Principal Lifetime.
Diversification Opportunities for Bank of America and Principal Lifetime
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Principal is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Principal Lifetime Hybrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime Hybrid and Bank of America 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 Principal Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Lifetime Hybrid has no effect on the direction of Bank of America i.e., Bank of America and Principal Lifetime go up and down completely randomly.
Pair Corralation between Bank of America and Principal Lifetime
Considering the 90-day investment horizon Bank of America is expected to generate 2.24 times more return on investment than Principal Lifetime. However, Bank of America is 2.24 times more volatile than Principal Lifetime Hybrid. It trades about 0.27 of its potential returns per unit of risk. Principal Lifetime Hybrid is currently generating about 0.31 per unit of risk. If you would invest 3,935 in Bank of America on April 24, 2025 and sell it today you would earn a total of 842.00 from holding Bank of America or generate 21.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Principal Lifetime Hybrid
Performance |
| Timeline |
| Bank of America |
| Principal Lifetime Hybrid |
Bank of America and Principal Lifetime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Principal Lifetime
The main advantage of trading using opposite Bank of America and Principal Lifetime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Principal Lifetime 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 Principal Lifetime will offset losses from the drop in Principal Lifetime's long position.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank |
| Principal Lifetime vs. Thrivent Natural Resources | Principal Lifetime vs. Hennessy Bp Energy | Principal Lifetime vs. Gamco Natural Resources | Principal Lifetime vs. Franklin Natural Resources |
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 the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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