Correlation Between BYD and Geely Automobile
Can any of the company-specific risk be diversified away by investing in both BYD and Geely Automobile 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 Geely Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Geely Automobile Holdings, you can compare the effects of market volatilities on BYD and Geely Automobile 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 Geely Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Geely Automobile.
Diversification Opportunities for BYD and Geely Automobile
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between BYD and Geely is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings 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 Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of BYD i.e., BYD and Geely Automobile go up and down completely randomly.
Pair Corralation between BYD and Geely Automobile
Assuming the 90 days trading horizon BYD Co is expected to generate 1.7 times more return on investment than Geely Automobile. However, BYD is 1.7 times more volatile than Geely Automobile Holdings. It trades about 0.03 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.02 per unit of risk. If you would invest 3,560 in BYD Co on October 30, 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 Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Co vs. Geely Automobile Holdings
Performance |
| Timeline |
| BYD Co |
| Geely Automobile Holdings |
BYD and Geely Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Geely Automobile
The main advantage of trading using opposite BYD and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD position performs unexpectedly, Geely Automobile 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 Geely Automobile will offset losses from the drop in Geely Automobile's long position.| BYD vs. Associated British Foods | BYD vs. New Residential Investment | BYD vs. Fevertree Drinks Plc | BYD vs. EJF Investments |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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