Correlation Between Bank of America and IA Financial

Can any of the company-specific risk be diversified away by investing in both Bank of America and IA 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 IA 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 iA Financial, you can compare the effects of market volatilities on Bank of America and IA 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 IA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and IA Financial.

Diversification Opportunities for Bank of America and IA Financial

0.96

Correlation Coefficient

Bank of America  IA Financial

Almost no diversification

The 3 months correlation between Bank and IAG is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and iA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iA Financial 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 IA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iA Financial has no effect on the direction of Bank of America i.e., Bank of America and IA Financial go up and down completely randomly.

Pair Corralation between Bank of America and IA Financial

Assuming the 90 days trading horizon Bank of America is expected to generate 1.27 times more return on investment than IA Financial. However, Bank of America is 1.27 times more volatile than iA Financial. It trades about 0.25 of its potential returns per unit of risk. iA Financial is currently generating about 0.17 per unit of risk. If you would invest  2,030  in Bank of America on April 24, 2025 and sell it today you would earn a total of  418.00  from holding Bank of America or generate 20.59% 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.  iA Financial

Bank of America

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

iA Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iA Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IA Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Bank of America and IA Financial

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

The idea behind Bank of America and iA Financial 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.