Correlation Between BYD and Premier Foods
Can any of the company-specific risk be diversified away by investing in both BYD and Premier Foods 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 Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co and Premier Foods PLC, you can compare the effects of market volatilities on BYD and Premier Foods 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 Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD and Premier Foods.
Diversification Opportunities for BYD and Premier Foods
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BYD and Premier is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of BYD i.e., BYD and Premier Foods go up and down completely randomly.
Pair Corralation between BYD and Premier Foods
Assuming the 90 days trading horizon BYD Co is expected to generate 12.61 times more return on investment than Premier Foods. However, BYD is 12.61 times more volatile than Premier Foods PLC. It trades about 0.05 of its potential returns per unit of risk. Premier Foods PLC is currently generating about 0.1 per unit of risk. If you would invest 3,505 in BYD Co on August 26, 2024 and sell it today you would earn a total of 55.00 from holding BYD Co or generate 1.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Co vs. Premier Foods PLC
Performance |
| Timeline |
| BYD Co |
| Premier Foods PLC |
BYD and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD and Premier Foods
The main advantage of trading using opposite BYD and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD position performs unexpectedly, Premier Foods 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 Premier Foods will offset losses from the drop in Premier Foods' long position.| BYD vs. Samsung Electronics Co | BYD vs. Samsung Electronics Co | BYD vs. Hyundai Motor | BYD vs. Toyota Motor Corp |
| Premier Foods vs. Walmart | Premier Foods vs. BYD Co | Premier Foods vs. Volkswagen AG Non Vtg | Premier Foods vs. Deutsche Post AG |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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