Correlation Between Bank of America and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Bank of America and Cardinal 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 Cardinal Health 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 Cardinal Health, you can compare the effects of market volatilities on Bank of America and Cardinal 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 Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Cardinal Health.
Diversification Opportunities for Bank of America and Cardinal Health
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Cardinal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Bank of America i.e., Bank of America and Cardinal Health go up and down completely randomly.
Pair Corralation between Bank of America and Cardinal Health
Considering the 90-day investment horizon Bank of America is expected to generate 1.27 times less return on investment than Cardinal Health. In addition to that, Bank of America is 1.08 times more volatile than Cardinal Health. It trades about 0.05 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.07 per unit of volatility. If you would invest 7,649 in Cardinal Health on August 24, 2024 and sell it today you would earn a total of 4,743 from holding Cardinal Health or generate 62.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Cardinal Health
Performance |
| Timeline |
| Bank of America |
| Cardinal Health |
Bank of America and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Cardinal Health
The main advantage of trading using opposite Bank of America and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Cardinal 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Cardinal Health vs. Quadrise Plc | Cardinal Health vs. Intuitive Investments Group | Cardinal Health vs. European Metals Holdings | Cardinal Health vs. Athelney Trust plc |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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