Correlation Between Bank of America and Lion Electric
Can any of the company-specific risk be diversified away by investing in both Bank of America and Lion Electric 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 Lion Electric 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 Lion Electric Corp, you can compare the effects of market volatilities on Bank of America and Lion Electric 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 Lion Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Lion Electric.
Diversification Opportunities for Bank of America and Lion Electric
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Lion is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Lion Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Electric Corp 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 Lion Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Electric Corp has no effect on the direction of Bank of America i.e., Bank of America and Lion Electric go up and down completely randomly.
Pair Corralation between Bank of America and Lion Electric
Considering the 90-day investment horizon Bank of America is expected to generate 0.33 times more return on investment than Lion Electric. However, Bank of America is 3.02 times less risky than Lion Electric. It trades about 0.1 of its potential returns per unit of risk. Lion Electric Corp is currently generating about -0.13 per unit of risk. If you would invest 3,009 in Bank of America on August 26, 2024 and sell it today you would earn a total of 1,691 from holding Bank of America or generate 56.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Bank of America vs. Lion Electric Corp
Performance |
| Timeline |
| Bank of America |
| Lion Electric Corp |
Bank of America and Lion Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Lion Electric
The main advantage of trading using opposite Bank of America and Lion Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Lion Electric 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 Lion Electric will offset losses from the drop in Lion Electric's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Lion Electric vs. Lion Electric Corp | Lion Electric vs. Alimentation Couchen Tard | Lion Electric vs. BRP Inc |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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