Correlation Between Bank of America and Lucara Diamond
Can any of the company-specific risk be diversified away by investing in both Bank of America and Lucara Diamond 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 Lucara Diamond 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 Lucara Diamond Corp, you can compare the effects of market volatilities on Bank of America and Lucara Diamond 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 Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Lucara Diamond.
Diversification Opportunities for Bank of America and Lucara Diamond
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Lucara is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Lucara Diamond Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucara Diamond 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 Lucara Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucara Diamond Corp has no effect on the direction of Bank of America i.e., Bank of America and Lucara Diamond go up and down completely randomly.
Pair Corralation between Bank of America and Lucara Diamond
Considering the 90-day investment horizon Bank of America is expected to generate 0.4 times more return on investment than Lucara Diamond. However, Bank of America is 2.53 times less risky than Lucara Diamond. It trades about 0.05 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about 0.0 per unit of risk. If you would invest 3,365 in Bank of America on November 1, 2024 and sell it today you would earn a total of 1,310 from holding Bank of America or generate 38.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Lucara Diamond Corp
Performance |
| Timeline |
| Bank of America |
| Lucara Diamond Corp |
Bank of America and Lucara Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Lucara Diamond
The main advantage of trading using opposite Bank of America and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Lucara Diamond 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 Lucara Diamond will offset losses from the drop in Lucara Diamond's long position.| Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Canadian Imperial Bank |
| Lucara Diamond vs. Reyna Silver Corp | Lucara Diamond vs. Torq Resources | Lucara Diamond vs. iShares Canadian HYBrid | Lucara Diamond vs. Altagas Cum Red |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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