Correlation Between B of A and Bellus Health

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Can any of the company-specific risk be diversified away by investing in both B of A and Bellus Health 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 B of A and Bellus Health 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 Bellus Health, you can compare the effects of market volatilities on B of A and Bellus Health 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 B of A with a short position of Bellus Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of B of A and Bellus Health.

Diversification Opportunities for B of A and Bellus Health

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between B of A and Bellus is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Bellus Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellus Health and B of A 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 Bellus Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellus Health has no effect on the direction of B of A i.e., B of A and Bellus Health go up and down completely randomly.

Pair Corralation between B of A and Bellus Health

Considering the 90-day investment horizon Bank Of America is expected to generate 0.84 times more return on investment than Bellus Health. However, Bank Of America is 1.2 times less risky than Bellus Health. It trades about 0.22 of its potential returns per unit of risk. Bellus Health is currently generating about -0.14 per unit of risk. If you would invest  3,107  in Bank Of America on August 29, 2022 and sell it today you would earn a total of  663.00  from holding Bank Of America or generate 21.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bank Of America  vs.  Bellus Health

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, B of A may actually be approaching a critical reversion point that can send shares even higher in December 2022.

B of A Price Channel

Bellus Health 
Bellus Performance
0 of 100
Over the last 90 days Bellus Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in December 2022. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bellus Price Channel

B of A and Bellus Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Bellus Health

The main advantage of trading using opposite B of A and Bellus Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A position performs unexpectedly, Bellus Health 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 Bellus Health will offset losses from the drop in Bellus Health's long position.
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The idea behind Bank Of America and Bellus Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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