Correlation Between Bank of America and Clearbridge Small
Can any of the company-specific risk be diversified away by investing in both Bank of America and Clearbridge Small 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 Clearbridge Small 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 Clearbridge Small Cap, you can compare the effects of market volatilities on Bank of America and Clearbridge Small 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 Clearbridge Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Clearbridge Small.
Diversification Opportunities for Bank of America and Clearbridge Small
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Clearbridge is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Clearbridge Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Small Cap 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 Clearbridge Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Small Cap has no effect on the direction of Bank of America i.e., Bank of America and Clearbridge Small go up and down completely randomly.
Pair Corralation between Bank of America and Clearbridge Small
Considering the 90-day investment horizon Bank of America is expected to generate 1.16 times more return on investment than Clearbridge Small. However, Bank of America is 1.16 times more volatile than Clearbridge Small Cap. It trades about 0.1 of its potential returns per unit of risk. Clearbridge Small Cap is currently generating about 0.1 per unit of risk. If you would invest 3,938 in Bank of America on September 1, 2024 and sell it today you would earn a total of 813.00 from holding Bank of America or generate 20.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Clearbridge Small Cap
Performance |
| Timeline |
| Bank of America |
| Clearbridge Small Cap |
Bank of America and Clearbridge Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Clearbridge Small
The main advantage of trading using opposite Bank of America and Clearbridge Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Clearbridge Small 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 Clearbridge Small will offset losses from the drop in Clearbridge Small's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Clearbridge Small vs. Pimco Funds | Clearbridge Small vs. Ashmore Emerging Markets | Clearbridge Small vs. John Hancock Money | Clearbridge Small vs. Transamerica Funds |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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