Correlation Between Bank of America and Greenlite Ventures

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

Diversification Opportunities for Bank of America and Greenlite Ventures

-0.96

Correlation Coefficient

Bank of America  Greenlite Ventures

Pay attention - limited upside

The 3 months correlation between Bank and Greenlite is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Greenlite Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenlite Ventures 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 Greenlite Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenlite Ventures has no effect on the direction of Bank of America i.e., Bank of America and Greenlite Ventures go up and down completely randomly.

Pair Corralation between Bank of America and Greenlite Ventures

Considering the 90-day investment horizon Bank of America is expected to generate 6.29 times less return on investment than Greenlite Ventures. But when comparing it to its historical volatility, Bank of America is 14.55 times less risky than Greenlite Ventures. It trades about 0.06 of its potential returns per unit of risk. Greenlite Ventures is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Greenlite Ventures on September 13, 2024 and sell it today you would lose (10.00) from holding Greenlite Ventures or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  Greenlite Ventures

Bank of America

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 14 (%) 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.

Greenlite Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenlite Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bank of America and Greenlite Ventures

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

The idea behind Bank of America and Greenlite Ventures 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.