Correlation Between Bank of America and KUAISHOU TECHNOLOGY

Can any of the company-specific risk be diversified away by investing in both Bank of America and KUAISHOU TECHNOLOGY 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 KUAISHOU TECHNOLOGY into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Verizon Communications and KUAISHOU TECHNOLOGY CLB, you can compare the effects of market volatilities on Bank of America and KUAISHOU TECHNOLOGY 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 KUAISHOU TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and KUAISHOU TECHNOLOGY.

Diversification Opportunities for Bank of America and KUAISHOU TECHNOLOGY

0.68

Correlation Coefficient

Bank of America  KUAISHOU TECHNOLOGY

Poor diversification

The 3 months correlation between Bank and KUAISHOU is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and KUAISHOU TECHNOLOGY CLB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KUAISHOU TECHNOLOGY CLB 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 Verizon Communications are associated (or correlated) with KUAISHOU TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KUAISHOU TECHNOLOGY CLB has no effect on the direction of Bank of America i.e., Bank of America and KUAISHOU TECHNOLOGY go up and down completely randomly.

Pair Corralation between Bank of America and KUAISHOU TECHNOLOGY

Assuming the 90 days trading horizon Bank of America is expected to generate 5.56 times less return on investment than KUAISHOU TECHNOLOGY. But when comparing it to its historical volatility, Verizon Communications is 2.59 times less risky than KUAISHOU TECHNOLOGY. It trades about 0.07 of its potential returns per unit of risk. KUAISHOU TECHNOLOGY CLB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  516.00  in KUAISHOU TECHNOLOGY CLB on December 21, 2024 and sell it today you would earn a total of  208.00  from holding KUAISHOU TECHNOLOGY CLB or generate 40.31% return on investment over 90 days.

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

Verizon Communications  vs.  KUAISHOU TECHNOLOGY CLB

Verizon Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KUAISHOU TECHNOLOGY CLB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KUAISHOU TECHNOLOGY CLB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, KUAISHOU TECHNOLOGY reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and KUAISHOU TECHNOLOGY

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

The idea behind Verizon Communications and KUAISHOU TECHNOLOGY CLB 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.

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 Stocks Directory module to find actively traded stocks across global markets.