Correlation Between Bank of America and Kandi Technologies

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

Diversification Opportunities for Bank of America and Kandi Technologies

0.66

Correlation Coefficient

Bank of America  Kandi Technologies

Poor diversification

The 3 months correlation between Bank and Kandi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Kandi Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kandi Technologies 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 Kandi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kandi Technologies has no effect on the direction of Bank of America i.e., Bank of America and Kandi Technologies go up and down completely randomly.

Pair Corralation between Bank of America and Kandi Technologies

Assuming the 90 days trading horizon Bank of America is expected to generate 12.53 times less return on investment than Kandi Technologies. But when comparing it to its historical volatility, Bank of America is 11.29 times less risky than Kandi Technologies. It trades about 0.05 of its potential returns per unit of risk. Kandi Technologies Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  115.00  in Kandi Technologies Group on December 2, 2024 and sell it today you would earn a total of  14.00  from holding Kandi Technologies Group or generate 12.17% return on investment over 90 days.

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

Bank of America  vs.  Kandi Technologies Group

Bank of America

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Bank of America is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Kandi Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kandi Technologies Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Kandi Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Kandi Technologies

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

The idea behind Bank of America and Kandi Technologies Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.