Correlation Between Bank of America and Clearbridge Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and Clearbridge Energy 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 Energy 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 Energy Mlp, you can compare the effects of market volatilities on Bank of America and Clearbridge Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Clearbridge Energy.
Diversification Opportunities for Bank of America and Clearbridge Energy
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Clearbridge is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Clearbridge Energy Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearbridge Energy Mlp 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearbridge Energy Mlp has no effect on the direction of Bank of America i.e., Bank of America and Clearbridge Energy go up and down completely randomly.
Pair Corralation between Bank of America and Clearbridge Energy
Considering the 90-day investment horizon Bank of America is expected to generate 1.16 times less return on investment than Clearbridge Energy. In addition to that, Bank of America is 1.83 times more volatile than Clearbridge Energy Mlp. It trades about 0.26 of its total potential returns per unit of risk. Clearbridge Energy Mlp is currently generating about 0.56 per unit of volatility. If you would invest 4,823 in Clearbridge Energy Mlp on August 28, 2024 and sell it today you would earn a total of 667.00 from holding Clearbridge Energy Mlp or generate 13.83% 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 Energy Mlp
Performance |
| Timeline |
| Bank of America |
| Clearbridge Energy Mlp |
Bank of America and Clearbridge Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Clearbridge Energy
The main advantage of trading using opposite Bank of America and Clearbridge Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Clearbridge Energy 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 Energy will offset losses from the drop in Clearbridge Energy's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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