Correlation Between BYD Company and Tesla
Can any of the company-specific risk be diversified away by investing in both BYD Company and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on BYD Company and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Tesla.
Diversification Opportunities for BYD Company and Tesla
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BYD and Tesla is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of BYD Company i.e., BYD Company and Tesla go up and down completely randomly.
Pair Corralation between BYD Company and Tesla
Assuming the 90 days horizon BYD Company is expected to generate 1.5 times less return on investment than Tesla. But when comparing it to its historical volatility, BYD Company Limited is 1.53 times less risky than Tesla. It trades about 0.05 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 17,300 in Tesla Inc on August 24, 2024 and sell it today you would earn a total of 15,195 from holding Tesla Inc or generate 87.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
BYD Company Limited vs. Tesla Inc
Performance |
| Timeline |
| BYD Limited |
| Tesla Inc |
BYD Company and Tesla Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Tesla
The main advantage of trading using opposite BYD Company and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.| BYD Company vs. Xiaomi | BYD Company vs. Geely Automobile Holdings | BYD Company vs. Nel ASA | BYD Company vs. JinkoSolar Holding Co |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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