Correlation Between Associated British and BYD
Can any of the company-specific risk be diversified away by investing in both Associated British and BYD 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 Associated British and BYD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and BYD Co, you can compare the effects of market volatilities on Associated British and BYD 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 Associated British with a short position of BYD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and BYD.
Diversification Opportunities for Associated British and BYD
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Associated and BYD is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Associated British 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 Associated British Foods are associated (or correlated) with BYD. 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 Associated British i.e., Associated British and BYD go up and down completely randomly.
Pair Corralation between Associated British and BYD
Assuming the 90 days trading horizon Associated British Foods is expected to under-perform the BYD. But the stock apears to be less risky and, when comparing its historical volatility, Associated British Foods is 3.34 times less risky than BYD. The stock trades about -0.23 of its potential returns per unit of risk. The BYD Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,212 in BYD Co on November 7, 2024 and sell it today you would earn a total of 348.00 from holding BYD Co or generate 10.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Associated British Foods vs. BYD Co
Performance |
| Timeline |
| Associated British Foods |
| BYD Co |
Associated British and BYD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and BYD
The main advantage of trading using opposite Associated British and BYD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, BYD 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 will offset losses from the drop in BYD's long position.| Associated British vs. Creo Medical Group | Associated British vs. Advanced Medical Solutions | Associated British vs. Solstad Offshore ASA | Associated British vs. Ondine Biomedical |
| BYD vs. Dairy Farm International | BYD vs. Golden Metal Resources | BYD vs. URU Metals | BYD vs. Eastinco Mining Exploration |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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