Correlation Between Bank of America and Leons Furniture
Can any of the company-specific risk be diversified away by investing in both Bank of America and Leons Furniture 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 Leons Furniture 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 Leons Furniture Limited, you can compare the effects of market volatilities on Bank of America and Leons Furniture 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 Leons Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Leons Furniture.
Diversification Opportunities for Bank of America and Leons Furniture
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Leons is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Leons Furniture Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leons Furniture 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 Leons Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leons Furniture has no effect on the direction of Bank of America i.e., Bank of America and Leons Furniture go up and down completely randomly.
Pair Corralation between Bank of America and Leons Furniture
Assuming the 90 days trading horizon Bank of America is expected to generate 1.14 times more return on investment than Leons Furniture. However, Bank of America is 1.14 times more volatile than Leons Furniture Limited. It trades about 0.17 of its potential returns per unit of risk. Leons Furniture Limited is currently generating about -0.07 per unit of risk. If you would invest 2,108 in Bank of America on September 2, 2024 and sell it today you would earn a total of 380.00 from holding Bank of America or generate 18.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Leons Furniture Limited
Performance |
| Timeline |
| Bank of America |
| Leons Furniture |
Bank of America and Leons Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Leons Furniture
The main advantage of trading using opposite Bank of America and Leons Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Leons Furniture 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 Leons Furniture will offset losses from the drop in Leons Furniture's long position.| Bank of America vs. Birchtech Corp | Bank of America vs. US Financial 15 | Bank of America vs. Enerev5 Metals | Bank of America vs. North American Financial |
| Leons Furniture vs. High Liner Foods | Leons Furniture vs. Richelieu Hardware | Leons Furniture vs. North West | Leons Furniture vs. Toromont Industries |
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 CEOs Directory module to screen CEOs from public companies around the world.
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