Correlation Between Jinhui Liquor and BYD Co

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Can any of the company-specific risk be diversified away by investing in both Jinhui Liquor and BYD Co 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 Jinhui Liquor and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jinhui Liquor Co and BYD Co Ltd, you can compare the effects of market volatilities on Jinhui Liquor and BYD Co 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 Jinhui Liquor with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jinhui Liquor and BYD Co.

Diversification Opportunities for Jinhui Liquor and BYD Co

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Jinhui and BYD is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Jinhui Liquor Co and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Jinhui Liquor 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 Jinhui Liquor Co are associated (or correlated) with BYD Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of Jinhui Liquor i.e., Jinhui Liquor and BYD Co go up and down completely randomly.

Pair Corralation between Jinhui Liquor and BYD Co

Assuming the 90 days trading horizon Jinhui Liquor Co is expected to generate 1.87 times more return on investment than BYD Co. However, Jinhui Liquor is 1.87 times more volatile than BYD Co Ltd. It trades about 0.0 of its potential returns per unit of risk. BYD Co Ltd is currently generating about -0.24 per unit of risk. If you would invest  2,032  in Jinhui Liquor Co on August 26, 2024 and sell it today you would lose (19.00) from holding Jinhui Liquor Co or give up 0.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Jinhui Liquor Co  vs.  BYD Co Ltd

 Performance 
       Timeline  
Jinhui Liquor 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Jinhui Liquor Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jinhui Liquor sustained solid returns over the last few months and may actually be approaching a breakup point.
BYD Co 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BYD Co sustained solid returns over the last few months and may actually be approaching a breakup point.

Jinhui Liquor and BYD Co Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Jinhui Liquor and BYD Co

The main advantage of trading using opposite Jinhui Liquor and BYD Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jinhui Liquor position performs unexpectedly, BYD Co 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 BYD Co will offset losses from the drop in BYD Co's long position.
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The idea behind Jinhui Liquor Co and BYD Co Ltd 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.
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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