Correlation Between Compass Group and BYD Co
Can any of the company-specific risk be diversified away by investing in both Compass Group and BYD Co 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 Compass Group and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compass Group PLC and BYD Co, you can compare the effects of market volatilities on Compass Group and BYD Co 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 Compass Group with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compass Group and BYD Co.
Diversification Opportunities for Compass Group and BYD Co
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Compass and BYD is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Compass Group PLC and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Compass Group 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 Compass Group PLC are associated (or correlated) with BYD Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of Compass Group i.e., Compass Group and BYD Co go up and down completely randomly.
Pair Corralation between Compass Group and BYD Co
Assuming the 90 days trading horizon Compass Group PLC is expected to generate 0.21 times more return on investment than BYD Co. However, Compass Group PLC is 4.82 times less risky than BYD Co. It trades about 0.39 of its potential returns per unit of risk. BYD Co is currently generating about 0.02 per unit of risk. If you would invest 253,000 in Compass Group PLC on August 30, 2024 and sell it today you would earn a total of 17,600 from holding Compass Group PLC or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compass Group PLC vs. BYD Co
Performance |
| Timeline |
| Compass Group PLC |
| BYD Co |
Compass Group and BYD Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compass Group and BYD Co
The main advantage of trading using opposite Compass Group and BYD Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compass Group position performs unexpectedly, BYD Co 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 BYD Co will offset losses from the drop in BYD Co's long position.| Compass Group vs. Fresenius Medical Care | Compass Group vs. Albion Technology General | Compass Group vs. DXC Technology Co | Compass Group vs. Monster Beverage Corp |
| BYD Co vs. Lendinvest PLC | BYD Co vs. Neometals | BYD Co vs. Albion Technology General | BYD Co vs. Jupiter Fund Management |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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