Correlation Between BYD ELECTRONIC and China BlueChemical
Can any of the company-specific risk be diversified away by investing in both BYD ELECTRONIC and China BlueChemical 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 ELECTRONIC and China BlueChemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD ELECTRONIC and China BlueChemical, you can compare the effects of market volatilities on BYD ELECTRONIC and China BlueChemical 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 ELECTRONIC with a short position of China BlueChemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD ELECTRONIC and China BlueChemical.
Diversification Opportunities for BYD ELECTRONIC and China BlueChemical
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BYD and China is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BYD ELECTRONIC and China BlueChemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China BlueChemical and BYD ELECTRONIC 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 ELECTRONIC are associated (or correlated) with China BlueChemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China BlueChemical has no effect on the direction of BYD ELECTRONIC i.e., BYD ELECTRONIC and China BlueChemical go up and down completely randomly.
Pair Corralation between BYD ELECTRONIC and China BlueChemical
Assuming the 90 days trading horizon BYD ELECTRONIC is expected to generate 1.29 times more return on investment than China BlueChemical. However, BYD ELECTRONIC is 1.29 times more volatile than China BlueChemical. It trades about 0.06 of its potential returns per unit of risk. China BlueChemical is currently generating about 0.03 per unit of risk. If you would invest 316.00 in BYD ELECTRONIC on September 4, 2024 and sell it today you would earn a total of 145.00 from holding BYD ELECTRONIC or generate 45.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
BYD ELECTRONIC vs. China BlueChemical
Performance |
| Timeline |
| BYD ELECTRONIC |
| China BlueChemical |
BYD ELECTRONIC and China BlueChemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD ELECTRONIC and China BlueChemical
The main advantage of trading using opposite BYD ELECTRONIC and China BlueChemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD ELECTRONIC position performs unexpectedly, China BlueChemical 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 China BlueChemical will offset losses from the drop in China BlueChemical's long position.| BYD ELECTRONIC vs. TOTAL GABON | BYD ELECTRONIC vs. Walgreens Boots Alliance | BYD ELECTRONIC vs. Peak Resources Limited |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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