Correlation Between BYD Co and Great Wall
Can any of the company-specific risk be diversified away by investing in both BYD Co and Great Wall 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 Co and Great Wall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Co Ltd and Great Wall Motor, you can compare the effects of market volatilities on BYD Co and Great Wall 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 Co with a short position of Great Wall. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Co and Great Wall.
Diversification Opportunities for BYD Co and Great Wall
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between BYD and Great is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Motor and BYD Co 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 Co Ltd are associated (or correlated) with Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of BYD Co i.e., BYD Co and Great Wall go up and down completely randomly.
Pair Corralation between BYD Co and Great Wall
Assuming the 90 days horizon BYD Co is expected to generate 1.37 times less return on investment than Great Wall. But when comparing it to its historical volatility, BYD Co Ltd is 1.54 times less risky than Great Wall. It trades about 0.04 of its potential returns per unit of risk. Great Wall Motor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,330 in Great Wall Motor on August 24, 2024 and sell it today you would earn a total of 509.00 from holding Great Wall Motor or generate 38.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.36% |
| Values | Daily Returns |
BYD Co Ltd vs. Great Wall Motor
Performance |
| Timeline |
| BYD Co |
| Great Wall Motor |
BYD Co and Great Wall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BYD Co and Great Wall
The main advantage of trading using opposite BYD Co and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Co position performs unexpectedly, Great Wall 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 Great Wall will offset losses from the drop in Great Wall's long position.The idea behind BYD Co Ltd and Great Wall Motor 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.| Great Wall vs. Mullen Automotive | Great Wall vs. Tesla Inc | Great Wall vs. Ford Motor | Great Wall vs. Nio Class A |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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