Correlation Between GoldMining and BYD
Can any of the company-specific risk be diversified away by investing in both GoldMining 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 GoldMining and BYD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and BYD Co, you can compare the effects of market volatilities on GoldMining 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 GoldMining with a short position of BYD. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and BYD.
Diversification Opportunities for GoldMining and BYD
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between GoldMining and BYD is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and GoldMining 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 GoldMining 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 GoldMining i.e., GoldMining and BYD go up and down completely randomly.
Pair Corralation between GoldMining and BYD
Assuming the 90 days trading horizon GoldMining is expected to under-perform the BYD. But the stock apears to be less risky and, when comparing its historical volatility, GoldMining is 2.6 times less risky than BYD. The stock trades about -0.03 of its potential returns per unit of risk. The BYD Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,334 in BYD Co on September 12, 2024 and sell it today you would earn a total of 226.00 from holding BYD Co or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 68.18% |
| Values | Daily Returns |
GoldMining vs. BYD Co
Performance |
| Timeline |
| GoldMining |
| BYD Co |
GoldMining and BYD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and BYD
The main advantage of trading using opposite GoldMining and BYD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining 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.| GoldMining vs. Hong Kong Land | GoldMining vs. Neometals | GoldMining vs. Coor Service Management | GoldMining vs. Fidelity Sustainable USD |
| BYD vs. Hochschild Mining plc | BYD vs. Bisichi Mining PLC | BYD vs. Southern Copper Corp | BYD vs. CAP LEASE AVIATION |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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