Correlation Between BYD Company and Xiaomi
Can any of the company-specific risk be diversified away by investing in both BYD Company and Xiaomi 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 Company and Xiaomi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Company Limited and Xiaomi, you can compare the effects of market volatilities on BYD Company and Xiaomi 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 Company with a short position of Xiaomi. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Xiaomi.
Diversification Opportunities for BYD Company and Xiaomi
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BYD and Xiaomi is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Xiaomi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi and BYD Company 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 Company Limited are associated (or correlated) with Xiaomi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi has no effect on the direction of BYD Company i.e., BYD Company and Xiaomi go up and down completely randomly.
Pair Corralation between BYD Company and Xiaomi
Assuming the 90 days horizon BYD Company Limited is expected to under-perform the Xiaomi. But the stock apears to be less risky and, when comparing its historical volatility, BYD Company Limited is 1.41 times less risky than Xiaomi. The stock trades about -0.12 of its potential returns per unit of risk. The Xiaomi is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 298.00 in Xiaomi on August 25, 2024 and sell it today you would earn a total of 47.00 from holding Xiaomi or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Company Limited vs. Xiaomi
Performance |
| Timeline |
| BYD Limited |
| Xiaomi |
BYD Company and Xiaomi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Xiaomi
The main advantage of trading using opposite BYD Company and Xiaomi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Xiaomi 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 Xiaomi will offset losses from the drop in Xiaomi's long position.| BYD Company vs. Xiaomi | BYD Company vs. Geely Automobile Holdings | BYD Company vs. Nel ASA | BYD Company vs. JinkoSolar Holding Co |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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