Correlation Between Bank of America and US Financial
Can any of the company-specific risk be diversified away by investing in both Bank of America and US Financial 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 US Financial 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 US Financial 15, you can compare the effects of market volatilities on Bank of America and US Financial 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and US Financial.
Diversification Opportunities for Bank of America and US Financial
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and FTU is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Bank of America i.e., Bank of America and US Financial go up and down completely randomly.
Pair Corralation between Bank of America and US Financial
Assuming the 90 days trading horizon Bank of America is expected to generate 3.83 times less return on investment than US Financial. But when comparing it to its historical volatility, Bank of America is 4.96 times less risky than US Financial. It trades about 0.08 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 45.00 in US Financial 15 on September 1, 2025 and sell it today you would earn a total of 6.00 from holding US Financial 15 or generate 13.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. US Financial 15
Performance |
| Timeline |
| Bank of America |
| US Financial 15 |
Bank of America and US Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and US Financial
The main advantage of trading using opposite Bank of America and US Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, US Financial 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 US Financial will offset losses from the drop in US Financial's long position.| Bank of America vs. Walmart Inc CDR | Bank of America vs. Amazon CDR | Bank of America vs. Amazon CDR | Bank of America vs. VOLKSWAGEN CDR |
| US Financial vs. IGM Financial | US Financial vs. Perseus Mining | US Financial vs. Bank of Nova | US Financial vs. E L Financial Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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