Correlation Between Bank of America and Equitable Holdings

Can any of the company-specific risk be diversified away by investing in both Bank of America and Equitable Holdings 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 Equitable Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Verizon Communications and Equitable Holdings, you can compare the effects of market volatilities on Bank of America and Equitable Holdings 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 Equitable Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Equitable Holdings.

Diversification Opportunities for Bank of America and Equitable Holdings

0.01

Correlation Coefficient

Bank of America  Equitable Holdings

Significant diversification

The 3 months correlation between Bank and Equitable is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings 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 Verizon Communications are associated (or correlated) with Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of Bank of America i.e., Bank of America and Equitable Holdings go up and down completely randomly.

Pair Corralation between Bank of America and Equitable Holdings

Assuming the 90 days trading horizon Verizon Communications is expected to under-perform the Equitable Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.38 times less risky than Equitable Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The Equitable Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,218  in Equitable Holdings on April 24, 2025 and sell it today you would earn a total of  182.00  from holding Equitable Holdings or generate 4.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Verizon Communications  vs.  Equitable Holdings

Verizon Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Bank of America is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Equitable Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equitable Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Equitable Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of America and Equitable Holdings

The main advantage of trading using opposite Bank of America and Equitable Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Equitable Holdings 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 Equitable Holdings will offset losses from the drop in Equitable Holdings' long position.

The idea behind Verizon Communications and Equitable Holdings 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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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.