Correlation Between Bank of America and Living Cell
Can any of the company-specific risk be diversified away by investing in both Bank of America and Living Cell 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 Living Cell 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 Living Cell Technologies, you can compare the effects of market volatilities on Bank of America and Living Cell 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 Living Cell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Living Cell.
Diversification Opportunities for Bank of America and Living Cell
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Living is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Living Cell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Living Cell Technologies 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 Living Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Living Cell Technologies has no effect on the direction of Bank of America i.e., Bank of America and Living Cell go up and down completely randomly.
Pair Corralation between Bank of America and Living Cell
Considering the 90-day investment horizon Bank of America is expected to generate 20.99 times less return on investment than Living Cell. But when comparing it to its historical volatility, Bank of America is 29.4 times less risky than Living Cell. It trades about 0.06 of its potential returns per unit of risk. Living Cell Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1.48 in Living Cell Technologies on September 3, 2024 and sell it today you would lose (1.05) from holding Living Cell Technologies or give up 70.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Living Cell Technologies
Performance |
| Timeline |
| Bank of America |
| Living Cell Technologies |
Bank of America and Living Cell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Living Cell
The main advantage of trading using opposite Bank of America and Living Cell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Living Cell 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 Living Cell will offset losses from the drop in Living Cell's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| Living Cell vs. Microbot Medical | Living Cell vs. Park Hotels Resorts | Living Cell vs. The Cheesecake Factory | Living Cell vs. Cardinal Health |
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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