Correlation Between Volkswagen and BYD Co
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG 110 and BYD Co Ltd, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and BYD Co.
Diversification Opportunities for Volkswagen and BYD Co
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Volkswagen and BYD is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 110 and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Volkswagen 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 Volkswagen AG 110 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 Volkswagen i.e., Volkswagen and BYD Co go up and down completely randomly.
Pair Corralation between Volkswagen and BYD Co
Assuming the 90 days horizon Volkswagen AG 110 is expected to generate 0.54 times more return on investment than BYD Co. However, Volkswagen AG 110 is 1.84 times less risky than BYD Co. It trades about 0.17 of its potential returns per unit of risk. BYD Co Ltd is currently generating about 0.03 per unit of risk. If you would invest 894.00 in Volkswagen AG 110 on September 14, 2024 and sell it today you would earn a total of 38.00 from holding Volkswagen AG 110 or generate 4.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volkswagen AG 110 vs. BYD Co Ltd
Performance |
| Timeline |
| Volkswagen AG 110 |
| BYD Co |
Volkswagen and BYD Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and BYD Co
The main advantage of trading using opposite Volkswagen and BYD Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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.| Volkswagen vs. Porsche Automobile Holding | Volkswagen vs. Bayerische Motoren Werke | Volkswagen vs. Volkswagen AG | Volkswagen vs. Mercedes Benz Group AG |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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