Correlation Between Bank of America and Ramsay Health
Can any of the company-specific risk be diversified away by investing in both Bank of America and Ramsay Health 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 Ramsay Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Ramsay Health Care, you can compare the effects of market volatilities on Bank of America and Ramsay Health 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 Ramsay Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Ramsay Health.
Diversification Opportunities for Bank of America and Ramsay Health
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Ramsay is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Ramsay Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramsay Health Care 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 Ramsay Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramsay Health Care has no effect on the direction of Bank of America i.e., Bank of America and Ramsay Health go up and down completely randomly.
Pair Corralation between Bank of America and Ramsay Health
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.76 times more return on investment than Ramsay Health. However, Verizon Communications is 1.32 times less risky than Ramsay Health. It trades about 0.06 of its potential returns per unit of risk. Ramsay Health Care is currently generating about -0.16 per unit of risk. If you would invest 3,742 in Verizon Communications on November 6, 2024 and sell it today you would earn a total of 149.00 from holding Verizon Communications or generate 3.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Ramsay Health Care
Performance |
| Timeline |
| Verizon Communications |
| Ramsay Health Care |
Bank of America and Ramsay Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Ramsay Health
The main advantage of trading using opposite Bank of America and Ramsay Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Ramsay Health 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 Ramsay Health will offset losses from the drop in Ramsay Health's long position.| Bank of America vs. ON SEMICONDUCTOR | Bank of America vs. KENEDIX OFFICE INV | Bank of America vs. PLAYMATES TOYS | Bank of America vs. CENTURIA OFFICE REIT |
| Ramsay Health vs. Cars Inc | Ramsay Health vs. Commercial Vehicle Group | Ramsay Health vs. VIENNA INSURANCE GR | Ramsay Health vs. Safety Insurance Group |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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