Correlation Between BYD and Etsy
Can any of the company-specific risk be diversified away by investing in both BYD and Etsy 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 Etsy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Etsy Inc, you can compare the effects of market volatilities on BYD and Etsy 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 Etsy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Etsy.
Diversification Opportunities for BYD and Etsy
Good diversification
The 3 months correlation between BYD and Etsy is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Etsy Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etsy Inc 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 Etsy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etsy Inc has no effect on the direction of BYD i.e., BYD and Etsy go up and down completely randomly.
Pair Corralation between BYD and Etsy
Assuming the 90 days trading horizon BYD Co is expected to generate 2.54 times more return on investment than Etsy. However, BYD is 2.54 times more volatile than Etsy Inc. It trades about 0.03 of its potential returns per unit of risk. Etsy Inc is currently generating about -0.11 per unit of risk. If you would invest 3,560 in BYD Co on October 25, 2024 and sell it today you would earn a total of 0.00 from holding BYD Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.48% |
| Values | Daily Returns |
BYD Co vs. Etsy Inc
Performance |
| Timeline |
| BYD Co |
| Etsy Inc |
BYD and Etsy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Etsy
The main advantage of trading using opposite BYD and Etsy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD position performs unexpectedly, Etsy 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 Etsy will offset losses from the drop in Etsy's long position.| BYD vs. LBG Media PLC | BYD vs. Synthomer plc | BYD vs. G5 Entertainment AB | BYD vs. Ecclesiastical Insurance Office |
| Etsy vs. Catalyst Media Group | Etsy vs. Ubisoft Entertainment | Etsy vs. Live Nation Entertainment | Etsy vs. Polar Capital Technology |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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