Correlation Between Virgin Wines and BYD
Can any of the company-specific risk be diversified away by investing in both Virgin Wines 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 Virgin Wines and BYD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virgin Wines UK and BYD Co, you can compare the effects of market volatilities on Virgin Wines 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 Virgin Wines with a short position of BYD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virgin Wines and BYD.
Diversification Opportunities for Virgin Wines and BYD
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Virgin and BYD is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Wines UK and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Virgin Wines 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 Virgin Wines UK 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 Virgin Wines i.e., Virgin Wines and BYD go up and down completely randomly.
Pair Corralation between Virgin Wines and BYD
Assuming the 90 days trading horizon Virgin Wines UK is expected to under-perform the BYD. But the stock apears to be less risky and, when comparing its historical volatility, Virgin Wines UK is 7.29 times less risky than BYD. The stock trades about -0.31 of its potential returns per unit of risk. The BYD Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,334 in BYD Co on September 12, 2024 and sell it today you would earn a total of 226.00 from holding BYD Co or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virgin Wines UK vs. BYD Co
Performance |
| Timeline |
| Virgin Wines UK |
| BYD Co |
Virgin Wines and BYD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virgin Wines and BYD
The main advantage of trading using opposite Virgin Wines and BYD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Wines 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.| Virgin Wines vs. Hyundai Motor | Virgin Wines vs. Toyota Motor Corp | Virgin Wines vs. SoftBank Group Corp | Virgin Wines vs. Halyk Bank of |
| BYD vs. Hochschild Mining plc | BYD vs. Bisichi Mining PLC | BYD vs. Southern Copper Corp | BYD vs. CAP LEASE AVIATION |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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