Correlation Between Bank of America and Covenant Logistics
Can any of the company-specific risk be diversified away by investing in both Bank of America and Covenant Logistics 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 Covenant Logistics 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 Covenant Logistics Group,, you can compare the effects of market volatilities on Bank of America and Covenant Logistics 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 Covenant Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Covenant Logistics.
Diversification Opportunities for Bank of America and Covenant Logistics
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Covenant is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Covenant Logistics Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics Group, 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 Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics Group, has no effect on the direction of Bank of America i.e., Bank of America and Covenant Logistics go up and down completely randomly.
Pair Corralation between Bank of America and Covenant Logistics
Considering the 90-day investment horizon Bank of America is expected to generate 0.75 times more return on investment than Covenant Logistics. However, Bank of America is 1.32 times less risky than Covenant Logistics. It trades about 0.29 of its potential returns per unit of risk. Covenant Logistics Group, is currently generating about 0.21 per unit of risk. If you would invest 4,231 in Bank of America on August 31, 2024 and sell it today you would earn a total of 546.00 from holding Bank of America or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. Covenant Logistics Group,
Performance |
| Timeline |
| Bank of America |
| Covenant Logistics Group, |
Bank of America and Covenant Logistics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Covenant Logistics
The main advantage of trading using opposite Bank of America and Covenant Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Covenant Logistics 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 Covenant Logistics will offset losses from the drop in Covenant Logistics' long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Covenant Logistics vs. PAMT P | Covenant Logistics vs. Safe Bulkers | Covenant Logistics vs. Safe Bulkers | Covenant Logistics vs. Atlas 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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