Correlation Between B of A and Healthequity

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

Diversification Opportunities for B of A and Healthequity

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between B of A and Healthequity is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Healthequity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthequity 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 Healthequity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthequity has no effect on the direction of B of A i.e., B of A and Healthequity go up and down completely randomly.

Pair Corralation between B of A and Healthequity

Considering the 90-day investment horizon Bank Of America is expected to under-perform the Healthequity. But the stock apears to be less risky and, when comparing its historical volatility, Bank Of America is 1.18 times less risky than Healthequity. The stock trades about -0.09 of its potential returns per unit of risk. The Healthequity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,617  in Healthequity on May 17, 2022 and sell it today you would earn a total of  680.00  from holding Healthequity or generate 12.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.2%
ValuesDaily Returns

Bank Of America  vs.  Healthequity

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Healthequity 
Healthequity Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Healthequity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Healthequity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Healthequity Price Channel

B of A and Healthequity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Healthequity

The main advantage of trading using opposite B of A and Healthequity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A position performs unexpectedly, Healthequity 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 Healthequity will offset losses from the drop in Healthequity's long position.
The idea behind Bank Of America and Healthequity 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.

Healthequity

Pair trading matchups for Healthequity

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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