Correlation Between Bank of America and Vericel Corp
Can any of the company-specific risk be diversified away by investing in both Bank of America and Vericel Corp 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 Vericel Corp 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 Vericel Corp Ord, you can compare the effects of market volatilities on Bank of America and Vericel Corp 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 Vericel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Vericel Corp.
Diversification Opportunities for Bank of America and Vericel Corp
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Vericel is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Vericel Corp Ord in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vericel Corp Ord 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 Vericel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vericel Corp Ord has no effect on the direction of Bank of America i.e., Bank of America and Vericel Corp go up and down completely randomly.
Pair Corralation between Bank of America and Vericel Corp
Considering the 90-day investment horizon Bank of America is expected to generate 2.63 times less return on investment than Vericel Corp. But when comparing it to its historical volatility, Bank of America is 1.64 times less risky than Vericel Corp. It trades about 0.27 of its potential returns per unit of risk. Vericel Corp Ord is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 4,375 in Vericel Corp Ord on August 26, 2024 and sell it today you would earn a total of 1,536 from holding Vericel Corp Ord or generate 35.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Vericel Corp Ord
Performance |
| Timeline |
| Bank of America |
| Vericel Corp Ord |
Bank of America and Vericel Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Vericel Corp
The main advantage of trading using opposite Bank of America and Vericel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Vericel Corp 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 Vericel Corp will offset losses from the drop in Vericel Corp's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Vericel Corp vs. Eliem Therapeutics | Vericel Corp vs. HCW Biologics | Vericel Corp vs. Scpharmaceuticals | Vericel Corp vs. Milestone Pharmaceuticals |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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