Correlation Between BYD Co and Vanfund Urban

Can any of the company-specific risk be diversified away by investing in both BYD Co and Vanfund Urban 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 BYD Co and Vanfund Urban into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BYD Co Ltd and Vanfund Urban Investment, you can compare the effects of market volatilities on BYD Co and Vanfund Urban 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 BYD Co with a short position of Vanfund Urban. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Co and Vanfund Urban.

Diversification Opportunities for BYD Co and Vanfund Urban

0.16

Correlation Coefficient

BYD Co  Vanfund Urban

Average diversification

The 3 months correlation between BYD and Vanfund is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Vanfund Urban Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanfund Urban Investment and BYD Co 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 BYD Co Ltd are associated (or correlated) with Vanfund Urban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanfund Urban Investment has no effect on the direction of BYD Co i.e., BYD Co and Vanfund Urban go up and down completely randomly.

Pair Corralation between BYD Co and Vanfund Urban

Assuming the 90 days trading horizon BYD Co Ltd is expected to generate 0.45 times more return on investment than Vanfund Urban. However, BYD Co Ltd is 2.21 times less risky than Vanfund Urban. It trades about 0.06 of its potential returns per unit of risk. Vanfund Urban Investment is currently generating about -0.18 per unit of risk. If you would invest  28,101  in BYD Co Ltd on September 27, 2024 and sell it today you would earn a total of  491.00  from holding BYD Co Ltd or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BYD Co Ltd  vs.  Vanfund Urban Investment

BYD Co

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BYD Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanfund Urban Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanfund Urban Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vanfund Urban sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BYD Co and Vanfund Urban

The main advantage of trading using opposite BYD Co and Vanfund Urban positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Co position performs unexpectedly, Vanfund Urban 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 Vanfund Urban will offset losses from the drop in Vanfund Urban's long position.

The idea behind BYD Co Ltd and Vanfund Urban Investment 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.