Correlation Between Bank of America and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both Bank of America and Standard Lithium 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 Standard Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Standard Lithium, you can compare the effects of market volatilities on Bank of America and Standard Lithium 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 Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Standard Lithium.
Diversification Opportunities for Bank of America and Standard Lithium
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Standard is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium 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 Verizon Communications are associated (or correlated) with Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of Bank of America i.e., Bank of America and Standard Lithium go up and down completely randomly.
Pair Corralation between Bank of America and Standard Lithium
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.31 times more return on investment than Standard Lithium. However, Verizon Communications is 3.22 times less risky than Standard Lithium. It trades about 0.05 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.02 per unit of risk. If you would invest 2,957 in Verizon Communications on December 6, 2024 and sell it today you would earn a total of 977.00 from holding Verizon Communications or generate 33.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 99.8% |
Values | Daily Returns |
Verizon Communications vs. Standard Lithium
Performance |
Timeline |
Verizon Communications |
Standard Lithium |
Bank of America and Standard Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Standard Lithium
The main advantage of trading using opposite Bank of America and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Standard Lithium 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.Bank of America vs. Lattice Semiconductor | Bank of America vs. NXP Semiconductors NV | Bank of America vs. FIREWEED METALS P | Bank of America vs. NORTHISLE PERGOLD INC |
Standard Lithium vs. BYD Company Limited | Standard Lithium vs. JinkoSolar Holding Co | Standard Lithium vs. American Lithium Corp | Standard Lithium vs. Samsung SDI Co |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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