Correlation Between BYD Company and Chaoda Modern
Can any of the company-specific risk be diversified away by investing in both BYD Company and Chaoda Modern 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 Chaoda Modern 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 Chaoda Modern Agriculture, you can compare the effects of market volatilities on BYD Company and Chaoda Modern 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 Chaoda Modern. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Chaoda Modern.
Diversification Opportunities for BYD Company and Chaoda Modern
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BYD and Chaoda is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Chaoda Modern Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaoda Modern Agriculture 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 Chaoda Modern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaoda Modern Agriculture has no effect on the direction of BYD Company i.e., BYD Company and Chaoda Modern go up and down completely randomly.
Pair Corralation between BYD Company and Chaoda Modern
Assuming the 90 days horizon BYD Company is expected to generate 24.16 times less return on investment than Chaoda Modern. But when comparing it to its historical volatility, BYD Company Limited is 16.7 times less risky than Chaoda Modern. It trades about 0.06 of its potential returns per unit of risk. Chaoda Modern Agriculture is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.30 in Chaoda Modern Agriculture on August 30, 2024 and sell it today you would lose (0.10) from holding Chaoda Modern Agriculture or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Company Limited vs. Chaoda Modern Agriculture
Performance |
| Timeline |
| BYD Limited |
| Chaoda Modern Agriculture |
BYD Company and Chaoda Modern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Chaoda Modern
The main advantage of trading using opposite BYD Company and Chaoda Modern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Chaoda Modern 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 Chaoda Modern will offset losses from the drop in Chaoda Modern's long position.| BYD Company vs. Li Auto | BYD Company vs. Xpeng Inc | BYD Company vs. Rivian Automotive | BYD Company vs. Nio Class A |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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