Correlation Between Hubei Radio and BYD Co

Can any of the company-specific risk be diversified away by investing in both Hubei Radio and BYD Co 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 Hubei Radio and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hubei Radio and and BYD Co Ltd, you can compare the effects of market volatilities on Hubei Radio and BYD Co 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 Hubei Radio with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hubei Radio and BYD Co.

Diversification Opportunities for Hubei Radio and BYD Co

0.54

Correlation Coefficient

Hubei Radio  BYD Co

Very weak diversification

The 3 months correlation between Hubei and BYD is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hubei Radio and and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Hubei Radio 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 Hubei Radio and are associated (or correlated) with BYD Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of Hubei Radio i.e., Hubei Radio and BYD Co go up and down completely randomly.

Pair Corralation between Hubei Radio and BYD Co

Assuming the 90 days trading horizon Hubei Radio and is expected to generate 1.38 times more return on investment than BYD Co. However, Hubei Radio is 1.38 times more volatile than BYD Co Ltd. It trades about 0.2 of its potential returns per unit of risk. BYD Co Ltd is currently generating about 0.07 per unit of risk. If you would invest  336.00  in Hubei Radio and on September 14, 2024 and sell it today you would earn a total of  150.00  from holding Hubei Radio and or generate 44.64% return on investment over 90 days.

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

Hubei Radio and  vs.  BYD Co Ltd

Hubei Radio

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubei Radio and are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hubei Radio sustained solid returns over the last few months and may actually be approaching a breakup point.

BYD Co

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BYD Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hubei Radio and BYD Co

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

The idea behind Hubei Radio and and BYD Co Ltd 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.