Correlation Between Bank of America and IShares Healthcare
Can any of the company-specific risk be diversified away by investing in both Bank of America and IShares 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 IShares Healthcare 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 iShares Healthcare Providers, you can compare the effects of market volatilities on Bank of America and IShares 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 IShares Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and IShares Healthcare.
Diversification Opportunities for Bank of America and IShares Healthcare
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and IShares is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and iShares Healthcare Providers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares 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 Bank of America are associated (or correlated) with IShares Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Healthcare has no effect on the direction of Bank of America i.e., Bank of America and IShares Healthcare go up and down completely randomly.
Pair Corralation between Bank of America and IShares Healthcare
Considering the 90-day investment horizon Bank of America is expected to generate 1.63 times more return on investment than IShares Healthcare. However, Bank of America is 1.63 times more volatile than iShares Healthcare Providers. It trades about 0.31 of its potential returns per unit of risk. iShares Healthcare Providers is currently generating about 0.18 per unit of risk. If you would invest 4,182 in Bank of America on September 1, 2024 and sell it today you would earn a total of 569.00 from holding Bank of America or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. iShares Healthcare Providers
Performance |
| Timeline |
| Bank of America |
| iShares Healthcare |
Bank of America and IShares Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and IShares Healthcare
The main advantage of trading using opposite Bank of America and IShares Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, IShares 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 IShares Healthcare will offset losses from the drop in IShares Healthcare's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| IShares Healthcare vs. iShares Pharmaceuticals ETF | IShares Healthcare vs. iShares Medical Devices | IShares Healthcare vs. iShares Healthcare ETF | IShares Healthcare vs. iShares Broker Dealers Securities |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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