Correlation Between 159005 and BYD Co

Can any of the company-specific risk be diversified away by investing in both 159005 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 159005 and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 159005 and BYD Co Ltd, you can compare the effects of market volatilities on 159005 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 159005 with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of 159005 and BYD Co.

Diversification Opportunities for 159005 and BYD Co

-0.11

Correlation Coefficient

159005  BYD Co

Good diversification

The 3 months correlation between 159005 and BYD is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding 159005 and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and 159005 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 159005 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 159005 i.e., 159005 and BYD Co go up and down completely randomly.

Pair Corralation between 159005 and BYD Co

Assuming the 90 days trading horizon 159005 is expected to generate 11.88 times less return on investment than BYD Co. But when comparing it to its historical volatility, 159005 is 81.57 times less risky than BYD Co. It trades about 0.16 of its potential returns per unit of risk. BYD Co Ltd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25,921  in BYD Co Ltd on September 30, 2024 and sell it today you would earn a total of  2,707  from holding BYD Co Ltd or generate 10.44% return on investment over 90 days.

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

159005  vs.  BYD Co Ltd

159005

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 159005 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 159005 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BYD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BYD Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BYD Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 159005 and BYD Co

The main advantage of trading using opposite 159005 and BYD Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 159005 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 159005 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.