Correlation Between Compass Group and BYD
Can any of the company-specific risk be diversified away by investing in both Compass Group 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 Compass Group and BYD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Group PLC and BYD Co, you can compare the effects of market volatilities on Compass Group 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 Compass Group with a short position of BYD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and BYD.
Diversification Opportunities for Compass Group and BYD
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Compass and BYD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Compass Group 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 Compass Group PLC 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 Compass Group i.e., Compass Group and BYD go up and down completely randomly.
Pair Corralation between Compass Group and BYD
Assuming the 90 days trading horizon Compass Group is expected to generate 3.19 times less return on investment than BYD. But when comparing it to its historical volatility, Compass Group PLC is 6.46 times less risky than BYD. It trades about 0.17 of its potential returns per unit of risk. BYD Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,898 in BYD Co on September 24, 2024 and sell it today you would earn a total of 662.00 from holding BYD Co or generate 22.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Compass Group PLC vs. BYD Co
Performance |
Timeline |
Compass Group PLC |
BYD Co |
Compass Group and BYD Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Compass Group and BYD
The main advantage of trading using opposite Compass Group and BYD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group 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.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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