Correlation Between Apple and BYD ELECTRONIC
Can any of the company-specific risk be diversified away by investing in both Apple and BYD ELECTRONIC 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 Apple and BYD ELECTRONIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and BYD ELECTRONIC, you can compare the effects of market volatilities on Apple and BYD ELECTRONIC 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 Apple with a short position of BYD ELECTRONIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and BYD ELECTRONIC.
Diversification Opportunities for Apple and BYD ELECTRONIC
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Apple and BYD is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and BYD ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD ELECTRONIC and Apple 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 Apple Inc are associated (or correlated) with BYD ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD ELECTRONIC has no effect on the direction of Apple i.e., Apple and BYD ELECTRONIC go up and down completely randomly.
Pair Corralation between Apple and BYD ELECTRONIC
Assuming the 90 days trading horizon Apple is expected to generate 3.14 times less return on investment than BYD ELECTRONIC. But when comparing it to its historical volatility, Apple Inc is 4.04 times less risky than BYD ELECTRONIC. It trades about 0.06 of its potential returns per unit of risk. BYD ELECTRONIC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 403.00 in BYD ELECTRONIC on August 28, 2024 and sell it today you would earn a total of 10.00 from holding BYD ELECTRONIC or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Apple Inc vs. BYD ELECTRONIC
Performance |
| Timeline |
| Apple Inc |
| BYD ELECTRONIC |
Apple and BYD ELECTRONIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and BYD ELECTRONIC
The main advantage of trading using opposite Apple and BYD ELECTRONIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, BYD ELECTRONIC 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 ELECTRONIC will offset losses from the drop in BYD ELECTRONIC's long position.The idea behind Apple Inc and BYD ELECTRONIC 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.| BYD ELECTRONIC vs. Apple Inc | BYD ELECTRONIC vs. Apple Inc | BYD ELECTRONIC vs. Microsoft | BYD ELECTRONIC vs. Microsoft |
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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