Correlation Between Bank of America and Longduoduo Company
Can any of the company-specific risk be diversified away by investing in both Bank of America and Longduoduo Company 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 Longduoduo Company 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 Longduoduo Company Limited, you can compare the effects of market volatilities on Bank of America and Longduoduo Company 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 Longduoduo Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Longduoduo Company.
Diversification Opportunities for Bank of America and Longduoduo Company
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Longduoduo is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Longduoduo Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longduoduo Limited 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 Longduoduo Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longduoduo Limited has no effect on the direction of Bank of America i.e., Bank of America and Longduoduo Company go up and down completely randomly.
Pair Corralation between Bank of America and Longduoduo Company
Considering the 90-day investment horizon Bank of America is expected to generate 2.1 times less return on investment than Longduoduo Company. But when comparing it to its historical volatility, Bank of America is 6.95 times less risky than Longduoduo Company. It trades about 0.15 of its potential returns per unit of risk. Longduoduo Company Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 499.00 in Longduoduo Company Limited on November 1, 2024 and sell it today you would lose (10.00) from holding Longduoduo Company Limited or give up 2.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Longduoduo Company Limited
Performance |
| Timeline |
| Bank of America |
| Longduoduo Limited |
Bank of America and Longduoduo Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Longduoduo Company
The main advantage of trading using opposite Bank of America and Longduoduo Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Longduoduo Company 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 Longduoduo Company will offset losses from the drop in Longduoduo Company's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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