Correlation Between BYD Company and Lexington Realty
Can any of the company-specific risk be diversified away by investing in both BYD Company and Lexington Realty 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 Lexington Realty 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 Lexington Realty Trust, you can compare the effects of market volatilities on BYD Company and Lexington Realty 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 Lexington Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Lexington Realty.
Diversification Opportunities for BYD Company and Lexington Realty
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BYD and Lexington is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Lexington Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexington Realty Trust 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 Lexington Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexington Realty Trust has no effect on the direction of BYD Company i.e., BYD Company and Lexington Realty go up and down completely randomly.
Pair Corralation between BYD Company and Lexington Realty
Assuming the 90 days trading horizon BYD Company Limited is expected to generate 3.85 times more return on investment than Lexington Realty. However, BYD Company is 3.85 times more volatile than Lexington Realty Trust. It trades about 0.38 of its potential returns per unit of risk. Lexington Realty Trust is currently generating about 0.13 per unit of risk. If you would invest 6,750 in BYD Company Limited on November 28, 2024 and sell it today you would earn a total of 2,750 from holding BYD Company Limited or generate 40.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Company Limited vs. Lexington Realty Trust
Performance |
| Timeline |
| BYD Limited |
| Lexington Realty Trust |
BYD Company and Lexington Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Lexington Realty
The main advantage of trading using opposite BYD Company and Lexington Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Lexington Realty 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 Lexington Realty will offset losses from the drop in Lexington Realty's long position.| BYD Company vs. DELTA AIR LINES | BYD Company vs. OAKTRSPECLENDNEW | BYD Company vs. Commonwealth Bank of | BYD Company vs. BANK OCHINA H |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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