Correlation Between BYD Company and Standard Lithium
Can any of the company-specific risk be diversified away by investing in both BYD Company and Standard Lithium 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 Standard Lithium 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 Standard Lithium, you can compare the effects of market volatilities on BYD Company and Standard Lithium 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 Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Standard Lithium.
Diversification Opportunities for BYD Company and Standard Lithium
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BYD and Standard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium 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 Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of BYD Company i.e., BYD Company and Standard Lithium go up and down completely randomly.
Pair Corralation between BYD Company and Standard Lithium
Assuming the 90 days horizon BYD Company Limited is expected to under-perform the Standard Lithium. But the stock apears to be less risky and, when comparing its historical volatility, BYD Company Limited is 2.79 times less risky than Standard Lithium. The stock trades about -0.08 of its potential returns per unit of risk. The Standard Lithium is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 135.00 in Standard Lithium on October 20, 2024 and sell it today you would earn a total of 29.00 from holding Standard Lithium or generate 21.48% 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. Standard Lithium
Performance |
| Timeline |
| BYD Limited |
| Standard Lithium |
BYD Company and Standard Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Standard Lithium
The main advantage of trading using opposite BYD Company and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Standard Lithium 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.| BYD Company vs. Xiaomi | BYD Company vs. Geely Automobile Holdings | BYD Company vs. Nel ASA | BYD Company vs. JinkoSolar Holding Co |
| Standard Lithium vs. BYD Company Limited | Standard Lithium vs. JinkoSolar Holding Co | Standard Lithium vs. American Lithium Corp | Standard Lithium vs. Samsung SDI 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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