Correlation Between Bank of America and UNIV HEALTH

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

Diversification Opportunities for Bank of America and UNIV HEALTH

-0.6

Correlation Coefficient

Bank of America  UNIV HEALTH

Excellent diversification

The 3 months correlation between Bank and UNIV is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and UNIV HEALTH SERV B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIV HEALTH SERV 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 UNIV HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIV HEALTH SERV has no effect on the direction of Bank of America i.e., Bank of America and UNIV HEALTH go up and down completely randomly.

Pair Corralation between Bank of America and UNIV HEALTH

Considering the 90-day investment horizon Bank of America is expected to generate 1.11 times less return on investment than UNIV HEALTH. But when comparing it to its historical volatility, Bank of America is 1.13 times less risky than UNIV HEALTH. It trades about 0.06 of its potential returns per unit of risk. UNIV HEALTH SERV B is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,988  in UNIV HEALTH SERV B on August 27, 2024 and sell it today you would earn a total of  6,712  from holding UNIV HEALTH SERV B or generate 55.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.22%
Values	Daily Returns

Bank of America  vs.  UNIV HEALTH SERV B

Bank of America

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

UNIV HEALTH SERV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNIV HEALTH SERV B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Bank of America and UNIV HEALTH

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

The idea behind Bank of America and UNIV HEALTH SERV B 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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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.