Correlation Between Bank of America and Loews Corp
Can any of the company-specific risk be diversified away by investing in both Bank of America and Loews Corp 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 Loews Corp 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 Loews Corp, you can compare the effects of market volatilities on Bank of America and Loews Corp 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 Loews Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Loews Corp.
Diversification Opportunities for Bank of America and Loews Corp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Loews is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp 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 Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of Bank of America i.e., Bank of America and Loews Corp go up and down completely randomly.
Pair Corralation between Bank of America and Loews Corp
Considering the 90-day investment horizon Bank of America is expected to generate 1.69 times more return on investment than Loews Corp. However, Bank of America is 1.69 times more volatile than Loews Corp. It trades about -0.03 of its potential returns per unit of risk. Loews Corp is currently generating about -0.07 per unit of risk. If you would invest 3,752 in Bank of America on February 1, 2024 and sell it today you would lose (57.00) from holding Bank of America or give up 1.52% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of America vs. Loews Corp
Performance |
Timeline |
Bank of America |
Loews Corp |
Bank of America and Loews Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Loews Corp
The main advantage of trading using opposite Bank of America and Loews Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Loews Corp 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 Loews Corp will offset losses from the drop in Loews Corp's long position.Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
Transaction History View history of all your transactions and understand their impact on performance |