Correlation Between Dupont De and BYD Company

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Can any of the company-specific risk be diversified away by investing in both Dupont De and BYD Company 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 Dupont De and BYD Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dupont De Nemours and BYD Company Limited, you can compare the effects of market volatilities on Dupont De and BYD Company 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 Dupont De with a short position of BYD Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dupont De and BYD Company.

Diversification Opportunities for Dupont De and BYD Company

DupontBYDDiversified AwayDupontBYDDiversified Away100%
0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Dupont and BYD is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited and Dupont De 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 Dupont De Nemours are associated (or correlated) with BYD Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Limited has no effect on the direction of Dupont De i.e., Dupont De and BYD Company go up and down completely randomly.

Pair Corralation between Dupont De and BYD Company

Allowing for the 90-day total investment horizon Dupont De is expected to generate 3.08 times less return on investment than BYD Company. But when comparing it to its historical volatility, Dupont De Nemours is 1.5 times less risky than BYD Company. It trades about 0.03 of its potential returns per unit of risk. BYD Company Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,731  in BYD Company Limited on November 26, 2024 and sell it today you would earn a total of  2,185  from holding BYD Company Limited or generate 80.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Dupont De Nemours  vs.  BYD Company Limited

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -100102030
JavaScript chart by amCharts 3.21.15DD BYDDF
       Timeline  
Dupont De Nemours 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb74767880828486
BYD Limited 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BYD Company Limited are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, BYD Company reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb35404550

Dupont De and BYD Company Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.23-1.67-1.11-0.55-0.009340.541.11.662.22 0.050.100.150.20
JavaScript chart by amCharts 3.21.15DD BYDDF
       Returns  

Pair Trading with Dupont De and BYD Company

The main advantage of trading using opposite Dupont De and BYD Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De position performs unexpectedly, BYD Company 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 Company will offset losses from the drop in BYD Company's long position.
The idea behind Dupont De Nemours and BYD Company Limited 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.
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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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