Correlation Between Bank of America and Lipum AB
Can any of the company-specific risk be diversified away by investing in both Bank of America and Lipum AB 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 Lipum AB 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 Lipum AB, you can compare the effects of market volatilities on Bank of America and Lipum AB 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 Lipum AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Lipum AB.
Diversification Opportunities for Bank of America and Lipum AB
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Lipum is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Lipum AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lipum AB 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 Lipum AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lipum AB has no effect on the direction of Bank of America i.e., Bank of America and Lipum AB go up and down completely randomly.
Pair Corralation between Bank of America and Lipum AB
Considering the 90-day investment horizon Bank of America is expected to generate 2.26 times less return on investment than Lipum AB. But when comparing it to its historical volatility, Bank of America is 2.05 times less risky than Lipum AB. It trades about 0.15 of its potential returns per unit of risk. Lipum AB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,360 in Lipum AB on November 8, 2024 and sell it today you would earn a total of 120.00 from holding Lipum AB or generate 8.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Bank of America vs. Lipum AB
Performance |
| Timeline |
| Bank of America |
| Lipum AB |
Bank of America and Lipum AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Lipum AB
The main advantage of trading using opposite Bank of America and Lipum AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Lipum AB 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 Lipum AB will offset losses from the drop in Lipum AB's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Canadian Imperial Bank | Bank of America vs. Bank of Montreal |
| Lipum AB vs. Ascelia Pharma AB | Lipum AB vs. NextCell Pharma AB | Lipum AB vs. Annexin Pharmaceuticals AB | Lipum AB vs. AlzeCure Pharma |
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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