Correlation Between BYD Company and Porsche Automobile
Can any of the company-specific risk be diversified away by investing in both BYD Company and Porsche Automobile 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 Porsche Automobile 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 Porsche Automobile Holding, you can compare the effects of market volatilities on BYD Company and Porsche Automobile 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 Porsche Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Porsche Automobile.
Diversification Opportunities for BYD Company and Porsche Automobile
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between BYD and Porsche is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Porsche Automobile Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobile 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 Porsche Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobile has no effect on the direction of BYD Company i.e., BYD Company and Porsche Automobile go up and down completely randomly.
Pair Corralation between BYD Company and Porsche Automobile
Assuming the 90 days horizon BYD Company Limited is expected to generate 0.97 times more return on investment than Porsche Automobile. However, BYD Company Limited is 1.03 times less risky than Porsche Automobile. It trades about -0.28 of its potential returns per unit of risk. Porsche Automobile Holding is currently generating about -0.29 per unit of risk. If you would invest 3,837 in BYD Company Limited on August 31, 2024 and sell it today you would lose (507.00) from holding BYD Company Limited or give up 13.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BYD Company Limited vs. Porsche Automobile Holding
Performance |
| Timeline |
| BYD Limited |
| Porsche Automobile |
BYD Company and Porsche Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Company and Porsche Automobile
The main advantage of trading using opposite BYD Company and Porsche Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Porsche Automobile 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 Porsche Automobile will offset losses from the drop in Porsche Automobile's long position.| BYD Company vs. Li Auto | BYD Company vs. Xpeng Inc | BYD Company vs. Rivian Automotive | BYD Company vs. Nio Class A |
| Porsche Automobile vs. Volkswagen AG 110 | Porsche Automobile vs. Stellantis NV | Porsche Automobile vs. Toyota Motor | Porsche Automobile vs. Honda Motor Co |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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