Correlation Between Bank of America and Avita Medical
Can any of the company-specific risk be diversified away by investing in both Bank of America and Avita Medical 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 Avita Medical 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 Avita Medical, you can compare the effects of market volatilities on Bank of America and Avita Medical 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 Avita Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Avita Medical.
Diversification Opportunities for Bank of America and Avita Medical
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Avita is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Avita Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avita Medical 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 Avita Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avita Medical has no effect on the direction of Bank of America i.e., Bank of America and Avita Medical go up and down completely randomly.
Pair Corralation between Bank of America and Avita Medical
Considering the 90-day investment horizon Bank of America is expected to generate 1.85 times less return on investment than Avita Medical. But when comparing it to its historical volatility, Bank of America is 1.68 times less risky than Avita Medical. It trades about 0.27 of its potential returns per unit of risk. Avita Medical is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,039 in Avita Medical on August 31, 2024 and sell it today you would earn a total of 243.00 from holding Avita Medical or generate 23.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Avita Medical
Performance |
| Timeline |
| Bank of America |
| Avita Medical |
Bank of America and Avita Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Avita Medical
The main advantage of trading using opposite Bank of America and Avita Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Avita Medical 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 Avita Medical will offset losses from the drop in Avita Medical'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 |
| Avita Medical vs. Abbott Laboratories | Avita Medical vs. Medtronic PLC | Avita Medical vs. Edwards Lifesciences Corp | Avita Medical 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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