Correlation Between Bank of America and LBI Capital
Can any of the company-specific risk be diversified away by investing in both Bank of America and LBI Capital 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 LBI Capital 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 LBI Capital Bhd, you can compare the effects of market volatilities on Bank of America and LBI Capital 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 LBI Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and LBI Capital.
Diversification Opportunities for Bank of America and LBI Capital
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and LBI is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and LBI Capital Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LBI Capital Bhd 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 LBI Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LBI Capital Bhd has no effect on the direction of Bank of America i.e., Bank of America and LBI Capital go up and down completely randomly.
Pair Corralation between Bank of America and LBI Capital
Considering the 90-day investment horizon Bank of America is expected to generate 0.39 times more return on investment than LBI Capital. However, Bank of America is 2.57 times less risky than LBI Capital. It trades about 0.27 of its potential returns per unit of risk. LBI Capital Bhd is currently generating about 0.08 per unit of risk. If you would invest 4,253 in Bank of America on August 30, 2024 and sell it today you would earn a total of 524.00 from holding Bank of America or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. LBI Capital Bhd
Performance |
| Timeline |
| Bank of America |
| LBI Capital Bhd |
Bank of America and LBI Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and LBI Capital
The main advantage of trading using opposite Bank of America and LBI Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, LBI Capital 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 LBI Capital will offset losses from the drop in LBI Capital's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings |
| LBI Capital vs. Apex Healthcare Bhd | LBI Capital vs. Sungei Bagan Rubber | LBI Capital vs. RHB Bank Bhd | LBI Capital vs. Daya Materials Bhd |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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