Correlation Between Bank of America and Latch

Can any of the company-specific risk be diversified away by investing in both Bank of America and Latch 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 Latch 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 Latch Inc, you can compare the effects of market volatilities on Bank of America and Latch 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 Latch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Latch.

Diversification Opportunities for Bank of America and Latch

0.0

Correlation Coefficient

Bank of America  Latch

Pay attention - limited upside

The 3 months correlation between Bank and Latch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Latch Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latch Inc 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 Latch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latch Inc has no effect on the direction of Bank of America i.e., Bank of America and Latch go up and down completely randomly.

Pair Corralation between Bank of America and Latch

If you would invest  119,544  in Bank of America on October 27, 2024 and sell it today you would earn a total of  2,969  from holding Bank of America or generate 2.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Bank of America  vs.  Latch Inc

Bank of America

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Bank of America is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

Latch Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Latch Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical indicators, Latch is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bank of America and Latch

The main advantage of trading using opposite Bank of America and Latch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Latch 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 Latch will offset losses from the drop in Latch's long position.

The idea behind Bank of America and Latch Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.