Correlation Between BYD Company and Baidu
Can any of the company-specific risk be diversified away by investing in both BYD Company and Baidu 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 Baidu 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 Baidu Inc, you can compare the effects of market volatilities on BYD Company and Baidu 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 Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Baidu.
Diversification Opportunities for BYD Company and Baidu
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BYD and Baidu is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc 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 Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of BYD Company i.e., BYD Company and Baidu go up and down completely randomly.
Pair Corralation between BYD Company and Baidu
Assuming the 90 days horizon BYD Company Limited is expected to generate 1.03 times more return on investment than Baidu. However, BYD Company is 1.03 times more volatile than Baidu Inc. It trades about 0.1 of its potential returns per unit of risk. Baidu Inc is currently generating about -0.02 per unit of risk. If you would invest 2,346 in BYD Company Limited on August 30, 2024 and sell it today you would earn a total of 792.00 from holding BYD Company Limited or generate 33.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Company Limited vs. Baidu Inc
Performance |
| Timeline |
| BYD Limited |
| Baidu Inc |
BYD Company and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Baidu
The main advantage of trading using opposite BYD Company and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Baidu 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 Baidu will offset losses from the drop in Baidu's long position.| BYD Company vs. Tesla Inc | BYD Company vs. Toyota Motor | BYD Company vs. Toyota Motor | BYD Company vs. MERCEDES BENZ GRP ADR14 |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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