Correlation Between BYD Company and Tanger Factory
Can any of the company-specific risk be diversified away by investing in both BYD Company and Tanger Factory 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 Tanger Factory 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 Tanger Factory Outlet, you can compare the effects of market volatilities on BYD Company and Tanger Factory 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 Tanger Factory. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Tanger Factory.
Diversification Opportunities for BYD Company and Tanger Factory
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BYD and Tanger is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Tanger Factory Outlet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tanger Factory Outlet 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 Tanger Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tanger Factory Outlet has no effect on the direction of BYD Company i.e., BYD Company and Tanger Factory go up and down completely randomly.
Pair Corralation between BYD Company and Tanger Factory
Assuming the 90 days trading horizon BYD Company is expected to generate 1.52 times less return on investment than Tanger Factory. In addition to that, BYD Company is 1.78 times more volatile than Tanger Factory Outlet. It trades about 0.07 of its total potential returns per unit of risk. Tanger Factory Outlet is currently generating about 0.18 per unit of volatility. If you would invest 2,469 in Tanger Factory Outlet on September 1, 2024 and sell it today you would earn a total of 1,014 from holding Tanger Factory Outlet or generate 41.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.24% |
| Values | Daily Returns |
BYD Company Limited vs. Tanger Factory Outlet
Performance |
| Timeline |
| BYD Limited |
| Tanger Factory Outlet |
BYD Company and Tanger Factory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Tanger Factory
The main advantage of trading using opposite BYD Company and Tanger Factory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Tanger Factory 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 Tanger Factory will offset losses from the drop in Tanger Factory's long position.The idea behind BYD Company Limited and Tanger Factory Outlet 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.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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