Correlation Between Bank of America and Optimi Health

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

Diversification Opportunities for Bank of America and Optimi Health

0.63

Correlation Coefficient

Bank of America  Optimi Health

Poor diversification

The 3 months correlation between Bank and Optimi is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Optimi Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimi Health Corp 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 Optimi Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimi Health Corp has no effect on the direction of Bank of America i.e., Bank of America and Optimi Health go up and down completely randomly.

Pair Corralation between Bank of America and Optimi Health

Considering the 90-day investment horizon Bank of America is expected to generate 0.23 times more return on investment than Optimi Health. However, Bank of America is 4.26 times less risky than Optimi Health. It trades about -0.02 of its potential returns per unit of risk. Optimi Health Corp is currently generating about -0.02 per unit of risk. If you would invest  4,361  in Bank of America on December 21, 2024 and sell it today you would lose (113.00) from holding Bank of America or give up 2.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  Optimi Health Corp

Bank of America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of America is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Optimi Health Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Optimi Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bank of America and Optimi Health

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

The idea behind Bank of America and Optimi Health Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.