Correlation Between BYD and CNH Industrial
Can any of the company-specific risk be diversified away by investing in both BYD and CNH Industrial 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 CNH Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and CNH Industrial NV, you can compare the effects of market volatilities on BYD and CNH Industrial 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 CNH Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and CNH Industrial.
Diversification Opportunities for BYD and CNH Industrial
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BYD and CNH is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and CNH Industrial NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNH Industrial NV 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 CNH Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNH Industrial NV has no effect on the direction of BYD i.e., BYD and CNH Industrial go up and down completely randomly.
Pair Corralation between BYD and CNH Industrial
Assuming the 90 days trading horizon BYD Co is expected to generate 1.33 times more return on investment than CNH Industrial. However, BYD is 1.33 times more volatile than CNH Industrial NV. It trades about 0.06 of its potential returns per unit of risk. CNH Industrial NV is currently generating about 0.03 per unit of risk. If you would invest 3,334 in BYD Co on October 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Co vs. CNH Industrial NV
Performance |
| Timeline |
| BYD Co |
| CNH Industrial NV |
BYD and CNH Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and CNH Industrial
The main advantage of trading using opposite BYD and CNH Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD position performs unexpectedly, CNH Industrial 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 CNH Industrial will offset losses from the drop in CNH Industrial's long position.The idea behind BYD Co and CNH Industrial NV 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.| CNH Industrial vs. Walmart | CNH Industrial vs. BYD Co | CNH Industrial vs. Volkswagen AG | CNH Industrial vs. Volkswagen AG Non Vtg |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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