Correlation Between Bank of America and Oaktree (lux)

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

Diversification Opportunities for Bank of America and Oaktree (lux)

0.25

Correlation Coefficient

Bank of America  Oaktree (lux)

Modest diversification

The 3 months correlation between Bank and Oaktree is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Oaktree Iii in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree (lux) 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 Oaktree (lux). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree (lux) has no effect on the direction of Bank of America i.e., Bank of America and Oaktree (lux) go up and down completely randomly.

Pair Corralation between Bank of America and Oaktree (lux)

Considering the 90-day investment horizon Bank of America is expected to generate 22.7 times more return on investment than Oaktree (lux). However, Bank of America is 22.7 times more volatile than Oaktree Iii . It trades about 0.13 of its potential returns per unit of risk. Oaktree Iii is currently generating about 0.38 per unit of risk. If you would invest  3,971  in Bank of America on October 8, 2024 and sell it today you would earn a total of  510.00  from holding Bank of America or generate 12.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Bank of America  vs.  Oaktree Iii

Bank of America

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Oaktree (lux)

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Oaktree Iii are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Oaktree (lux) is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of America and Oaktree (lux)

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

The idea behind Bank of America and Oaktree Iii 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.