Correlation Between Bank of America and Lkcm International
Can any of the company-specific risk be diversified away by investing in both Bank of America and Lkcm International 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 Lkcm International 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 Lkcm International Equity, you can compare the effects of market volatilities on Bank of America and Lkcm International 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 Lkcm International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Lkcm International.
Diversification Opportunities for Bank of America and Lkcm International
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Lkcm is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Lkcm International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm International Equity 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 Lkcm International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm International Equity has no effect on the direction of Bank of America i.e., Bank of America and Lkcm International go up and down completely randomly.
Pair Corralation between Bank of America and Lkcm International
Considering the 90-day investment horizon Bank of America is expected to under-perform the Lkcm International. In addition to that, Bank of America is 1.2 times more volatile than Lkcm International Equity. It trades about -0.36 of its total potential returns per unit of risk. Lkcm International Equity is currently generating about 0.06 per unit of volatility. If you would invest 1,381 in Lkcm International Equity on November 28, 2024 and sell it today you would earn a total of 13.00 from holding Lkcm International Equity or generate 0.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Lkcm International Equity
Performance |
| Timeline |
| Bank of America |
| Lkcm International Equity |
Bank of America and Lkcm International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Lkcm International
The main advantage of trading using opposite Bank of America and Lkcm International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Lkcm International 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 Lkcm International will offset losses from the drop in Lkcm International's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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