Correlation Between Visa and BYD Company
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and BYD Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and BYD Company Limited, you can compare the effects of market volatilities on Visa 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 Visa with a short position of BYD Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and BYD Company.
Diversification Opportunities for Visa and BYD Company
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Visa and BYD is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited and Visa 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 Visa Class A 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 Visa i.e., Visa and BYD Company go up and down completely randomly.
Pair Corralation between Visa and BYD Company
Taking into account the 90-day investment horizon Visa is expected to generate 1.71 times less return on investment than BYD Company. But when comparing it to its historical volatility, Visa Class A is 2.84 times less risky than BYD Company. It trades about 0.11 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 4,693 in BYD Company Limited on November 29, 2024 and sell it today you would earn a total of 4,807 from holding BYD Company Limited or generate 102.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.6% |
| Values | Daily Returns |
Visa Class A vs. BYD Company Limited
Performance |
| Timeline |
| Visa Class A |
| BYD Limited |
Visa and BYD Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and BYD Company
The main advantage of trading using opposite Visa and BYD Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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