Correlation Between Bank of America and Localiza Rent
Can any of the company-specific risk be diversified away by investing in both Bank of America and Localiza Rent 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 Localiza Rent 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 Localiza Rent A, you can compare the effects of market volatilities on Bank of America and Localiza Rent 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 Localiza Rent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Localiza Rent.
Diversification Opportunities for Bank of America and Localiza Rent
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Localiza is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Localiza Rent A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Localiza Rent A 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 Localiza Rent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Localiza Rent A has no effect on the direction of Bank of America i.e., Bank of America and Localiza Rent go up and down completely randomly.
Pair Corralation between Bank of America and Localiza Rent
Considering the 90-day investment horizon Bank of America is expected to generate 0.38 times more return on investment than Localiza Rent. However, Bank of America is 2.62 times less risky than Localiza Rent. It trades about 0.14 of its potential returns per unit of risk. Localiza Rent A is currently generating about -0.03 per unit of risk. If you would invest 2,873 in Bank of America on August 24, 2024 and sell it today you would earn a total of 1,836 from holding Bank of America or generate 63.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Localiza Rent A
Performance |
| Timeline |
| Bank of America |
| Localiza Rent A |
Bank of America and Localiza Rent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Localiza Rent
The main advantage of trading using opposite Bank of America and Localiza Rent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Localiza Rent 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 Localiza Rent will offset losses from the drop in Localiza Rent's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Localiza Rent vs. United Rentals | Localiza Rent vs. Ashtead Gro | Localiza Rent vs. Ashtead Group plc | Localiza Rent vs. AerCap Holdings NV |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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