Correlation Between BYD Company and Companhia
Can any of the company-specific risk be diversified away by investing in both BYD Company and Companhia 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 Companhia 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 Companhia de Saneamento, you can compare the effects of market volatilities on BYD Company and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Companhia.
Diversification Opportunities for BYD Company and Companhia
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BYD and Companhia is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of BYD Company i.e., BYD Company and Companhia go up and down completely randomly.
Pair Corralation between BYD Company and Companhia
Assuming the 90 days trading horizon BYD Company is expected to generate 2.3 times less return on investment than Companhia. In addition to that, BYD Company is 1.39 times more volatile than Companhia de Saneamento. It trades about 0.02 of its total potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.07 per unit of volatility. If you would invest 877.00 in Companhia de Saneamento on September 1, 2024 and sell it today you would earn a total of 663.00 from holding Companhia de Saneamento or generate 75.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.78% |
| Values | Daily Returns |
BYD Company Limited vs. Companhia de Saneamento
Performance |
| Timeline |
| BYD Limited |
| Companhia de Saneamento |
BYD Company and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Companhia
The main advantage of trading using opposite BYD Company and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.The idea behind BYD Company Limited and Companhia de Saneamento pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Companhia vs. United Utilities Group | Companhia vs. Guangdong Investment Limited | Companhia vs. Superior Plus Corp | Companhia vs. NMI Holdings |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |