Correlation Between BYD and Compass Group
Can any of the company-specific risk be diversified away by investing in both BYD and Compass Group 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 and Compass Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Compass Group PLC, you can compare the effects of market volatilities on BYD and Compass Group 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 with a short position of Compass Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Compass Group.
Diversification Opportunities for BYD and Compass Group
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between BYD and Compass is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Compass Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Group PLC and BYD 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 are associated (or correlated) with Compass Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Group PLC has no effect on the direction of BYD i.e., BYD and Compass Group go up and down completely randomly.
Pair Corralation between BYD and Compass Group
Assuming the 90 days trading horizon BYD Co is expected to generate 6.14 times more return on investment than Compass Group. However, BYD is 6.14 times more volatile than Compass Group PLC. It trades about 0.13 of its potential returns per unit of risk. Compass Group PLC is currently generating about -0.01 per unit of risk. 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 | Flat |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
BYD Co vs. Compass Group PLC
Performance |
Timeline |
BYD Co |
Compass Group PLC |
BYD and Compass Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BYD and Compass Group
The main advantage of trading using opposite BYD and Compass Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD position performs unexpectedly, Compass Group 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 Compass Group will offset losses from the drop in Compass Group's long position.The idea behind BYD Co and Compass Group PLC 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.Compass Group vs. Ondine Biomedical | Compass Group vs. Europa Metals | Compass Group vs. Revolution Beauty Group | Compass Group vs. Moonpig Group PLC |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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