Correlation Between Bank of America and Medicover
Can any of the company-specific risk be diversified away by investing in both Bank of America and Medicover 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 Medicover into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Medicover AB, you can compare the effects of market volatilities on Bank of America and Medicover 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 Medicover. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Medicover.
Diversification Opportunities for Bank of America and Medicover
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Medicover is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Medicover AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicover AB 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 Medicover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicover AB has no effect on the direction of Bank of America i.e., Bank of America and Medicover go up and down completely randomly.
Pair Corralation between Bank of America and Medicover
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.59 times more return on investment than Medicover. However, Verizon Communications is 1.69 times less risky than Medicover. It trades about 0.05 of its potential returns per unit of risk. Medicover AB is currently generating about 0.02 per unit of risk. If you would invest 3,068 in Verizon Communications on September 3, 2024 and sell it today you would earn a total of 1,107 from holding Verizon Communications or generate 36.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Medicover AB
Performance |
| Timeline |
| Verizon Communications |
| Medicover AB |
Bank of America and Medicover Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Medicover
The main advantage of trading using opposite Bank of America and Medicover positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Medicover 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 Medicover will offset losses from the drop in Medicover's long position.| Bank of America vs. CAL MAINE FOODS | Bank of America vs. GEELY AUTOMOBILE | Bank of America vs. Nomad Foods | Bank of America vs. NISSIN FOODS HLDGS |
| Medicover vs. Humana Inc | Medicover vs. Ramsay Gnrale de | Medicover vs. Superior Plus Corp | Medicover vs. Origin Agritech |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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