Correlation Between Bank of America and Netcare
Can any of the company-specific risk be diversified away by investing in both Bank of America and Netcare 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 Netcare 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 Netcare, you can compare the effects of market volatilities on Bank of America and Netcare 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 Netcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Netcare.
Diversification Opportunities for Bank of America and Netcare
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Netcare is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Netcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcare 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 Netcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcare has no effect on the direction of Bank of America i.e., Bank of America and Netcare go up and down completely randomly.
Pair Corralation between Bank of America and Netcare
Considering the 90-day investment horizon Bank of America is expected to generate 1.29 times less return on investment than Netcare. In addition to that, Bank of America is 1.05 times more volatile than Netcare. It trades about 0.1 of its total potential returns per unit of risk. Netcare is currently generating about 0.14 per unit of volatility. If you would invest 115,000 in Netcare on September 1, 2024 and sell it today you would earn a total of 33,000 from holding Netcare or generate 28.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Bank of America vs. Netcare
Performance |
| Timeline |
| Bank of America |
| Netcare |
Bank of America and Netcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Netcare
The main advantage of trading using opposite Bank of America and Netcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Netcare 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 Netcare will offset losses from the drop in Netcare'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 |
| Netcare vs. HomeChoice Investments | Netcare vs. We Buy Cars | Netcare vs. Ascendis Health | Netcare vs. Astral Foods |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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