Correlation Between LBG Media and BYD
Can any of the company-specific risk be diversified away by investing in both LBG Media and BYD 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 LBG Media and BYD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LBG Media PLC and BYD Co, you can compare the effects of market volatilities on LBG Media and BYD 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 LBG Media with a short position of BYD. Check out your portfolio center. Please also check ongoing floating volatility patterns of LBG Media and BYD.
Diversification Opportunities for LBG Media and BYD
Modest diversification
The 3 months correlation between LBG and BYD is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding LBG Media PLC and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and LBG Media 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 LBG Media PLC are associated (or correlated) with BYD. 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 LBG Media i.e., LBG Media and BYD go up and down completely randomly.
Pair Corralation between LBG Media and BYD
Assuming the 90 days trading horizon LBG Media PLC is expected to under-perform the BYD. But the stock apears to be less risky and, when comparing its historical volatility, LBG Media PLC is 3.54 times less risky than BYD. The stock trades about -0.22 of its potential returns per unit of risk. The BYD Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,560 in BYD Co on October 27, 2024 and sell it today you would earn a total of 0.00 from holding BYD Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LBG Media PLC vs. BYD Co
Performance |
| Timeline |
| LBG Media PLC |
| BYD Co |
LBG Media and BYD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LBG Media and BYD
The main advantage of trading using opposite LBG Media and BYD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LBG Media position performs unexpectedly, BYD 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 will offset losses from the drop in BYD's long position.| LBG Media vs. SMA Solar Technology | LBG Media vs. Telecom Italia SpA | LBG Media vs. Gamma Communications PLC | LBG Media vs. Cognizant Technology Solutions |
| BYD vs. Fevertree Drinks Plc | BYD vs. Verizon Communications | BYD vs. Norman Broadbent Plc | BYD vs. Broadcom |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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