Correlation Between Bank of America and Electromed
Can any of the company-specific risk be diversified away by investing in both Bank of America and Electromed 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 Electromed 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 Electromed, you can compare the effects of market volatilities on Bank of America and Electromed 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 Electromed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Electromed.
Diversification Opportunities for Bank of America and Electromed
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Electromed is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Electromed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromed 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 Electromed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromed has no effect on the direction of Bank of America i.e., Bank of America and Electromed go up and down completely randomly.
Pair Corralation between Bank of America and Electromed
Considering the 90-day investment horizon Bank of America is expected to generate 1.97 times less return on investment than Electromed. But when comparing it to its historical volatility, Bank of America is 2.13 times less risky than Electromed. It trades about 0.1 of its potential returns per unit of risk. Electromed is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,224 in Electromed on August 31, 2024 and sell it today you would earn a total of 1,854 from holding Electromed or generate 151.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Electromed
Performance |
| Timeline |
| Bank of America |
| Electromed |
Bank of America and Electromed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Electromed
The main advantage of trading using opposite Bank of America and Electromed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Electromed 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 Electromed will offset losses from the drop in Electromed's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Electromed vs. Abbott Laboratories | Electromed vs. Medtronic PLC | Electromed vs. Edwards Lifesciences Corp | Electromed vs. ZimVie Inc |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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