Correlation Between American Public and BYD Co

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Can any of the company-specific risk be diversified away by investing in both American Public 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 American Public and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Public Education and BYD Co Ltd, you can compare the effects of market volatilities on American Public 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 American Public with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Public and BYD Co.

Diversification Opportunities for American Public and BYD Co

-0.66
  Correlation Coefficient

Excellent diversification

The 3 months correlation between American and BYD is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and American Public 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 American Public Education 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 American Public i.e., American Public and BYD Co go up and down completely randomly.

Pair Corralation between American Public and BYD Co

Given the investment horizon of 90 days American Public Education is expected to generate 2.29 times more return on investment than BYD Co. However, American Public is 2.29 times more volatile than BYD Co Ltd. It trades about 0.05 of its potential returns per unit of risk. BYD Co Ltd is currently generating about 0.04 per unit of risk. If you would invest  1,353  in American Public Education on October 1, 2024 and sell it today you would earn a total of  795.00  from holding American Public Education or generate 58.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

American Public Education  vs.  BYD Co Ltd

 Performance 
       Timeline  
American Public Education 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical and fundamental indicators, American Public demonstrated solid returns over the last few months and may actually be approaching a breakup point.
BYD Co 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BYD Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, BYD Co is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

American Public and BYD Co Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Public and BYD Co

The main advantage of trading using opposite American Public and BYD Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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 American Public Education 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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