Correlation Between Target Corp and BYD

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

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

Diversification Opportunities for Target Corp and BYD

-0.01

Correlation Coefficient

Target Corp  BYD

Good diversification

The 3 months correlation between Target and BYD is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Target Corp and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Target Corp 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 Target Corp are associated (or correlated) with BYD. 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 Target Corp i.e., Target Corp and BYD go up and down completely randomly.

Pair Corralation between Target Corp and BYD

Assuming the 90 days trading horizon Target Corp is expected to generate 27.05 times less return on investment than BYD. But when comparing it to its historical volatility, Target Corp is 3.33 times less risky than BYD. It trades about 0.02 of its potential returns per unit of risk. BYD Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,165  in BYD Co on September 24, 2024 and sell it today you would earn a total of  395.00  from holding BYD Co or generate 12.48% return on investment over 90 days.

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

Target Corp  vs.  BYD Co

Target Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Target Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BYD Co

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BYD unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Target Corp and BYD

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

The idea behind Target Corp and BYD Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.