Correlation Between BYD Co and Postal Savings

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

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

Diversification Opportunities for BYD Co and Postal Savings

0.63

Correlation Coefficient

BYD Co  Postal Savings

Poor diversification

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

Pair Corralation between BYD Co and Postal Savings

Assuming the 90 days trading horizon BYD Co Ltd is expected to under-perform the Postal Savings. In addition to that, BYD Co is 1.22 times more volatile than Postal Savings Bank. It trades about -0.03 of its total potential returns per unit of risk. Postal Savings Bank is currently generating about 0.14 per unit of volatility. If you would invest  524.00  in Postal Savings Bank on September 24, 2024 and sell it today you would earn a total of  18.00  from holding Postal Savings Bank or generate 3.44% return on investment over 90 days.

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

BYD Co Ltd  vs.  Postal Savings Bank

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.

Postal Savings Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Postal Savings Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Postal Savings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BYD Co and Postal Savings

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

The idea behind BYD Co Ltd and Postal Savings Bank 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.