Correlation Between Bank of America and Sonic Healthcare
Can any of the company-specific risk be diversified away by investing in both Bank of America and Sonic Healthcare 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 Sonic Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Sonic Healthcare Limited, you can compare the effects of market volatilities on Bank of America and Sonic Healthcare 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 Sonic Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Sonic Healthcare.
Diversification Opportunities for Bank of America and Sonic Healthcare
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Sonic is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Sonic Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonic Healthcare 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 Sonic Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonic Healthcare has no effect on the direction of Bank of America i.e., Bank of America and Sonic Healthcare go up and down completely randomly.
Pair Corralation between Bank of America and Sonic Healthcare
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.58 times more return on investment than Sonic Healthcare. However, Verizon Communications is 1.72 times less risky than Sonic Healthcare. It trades about 0.41 of its potential returns per unit of risk. Sonic Healthcare Limited is currently generating about 0.16 per unit of risk. If you would invest 3,838 in Verizon Communications on September 2, 2024 and sell it today you would earn a total of 375.00 from holding Verizon Communications or generate 9.77% 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. Sonic Healthcare Limited
Performance |
| Timeline |
| Verizon Communications |
| Sonic Healthcare |
Bank of America and Sonic Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Sonic Healthcare
The main advantage of trading using opposite Bank of America and Sonic Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Sonic Healthcare 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 Sonic Healthcare will offset losses from the drop in Sonic Healthcare's long position.| Bank of America vs. SIVERS SEMICONDUCTORS AB | Bank of America vs. Darden Restaurants | Bank of America vs. Reliance Steel Aluminum | Bank of America vs. Q2M Managementberatung AG |
| Sonic Healthcare vs. ULTRA CLEAN HLDGS | Sonic Healthcare vs. Iridium Communications | Sonic Healthcare vs. Cogent Communications Holdings | Sonic Healthcare vs. Consolidated Communications Holdings |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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