Correlation Between Bank of America and Blade Air

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

Diversification Opportunities for Bank of America and Blade Air

0.43

Correlation Coefficient

Bank of America  Blade Air

Very weak diversification

The 3 months correlation between Bank and Blade is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Blade Air Mobility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blade Air Mobility 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 Blade Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blade Air Mobility has no effect on the direction of Bank of America i.e., Bank of America and Blade Air go up and down completely randomly.

Pair Corralation between Bank of America and Blade Air

Considering the 90-day investment horizon Bank of America is expected to generate 11.33 times less return on investment than Blade Air. But when comparing it to its historical volatility, Bank of America is 21.39 times less risky than Blade Air. It trades about 0.2 of its potential returns per unit of risk. Blade Air Mobility is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Blade Air Mobility on February 18, 2024 and sell it today you would earn a total of  6.00  from holding Blade Air Mobility or generate 30.0% 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.  Blade Air Mobility

Bank of America

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blade Air Mobility

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blade Air Mobility are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Blade Air showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Blade Air

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

The idea behind Bank of America and Blade Air Mobility 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.