Correlation Between BYD Co and Jiugui Liquor

Can any of the company-specific risk be diversified away by investing in both BYD Co and Jiugui Liquor 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 Jiugui Liquor 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 Jiugui Liquor Co, you can compare the effects of market volatilities on BYD Co and Jiugui Liquor 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 Jiugui Liquor. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Co and Jiugui Liquor.

Diversification Opportunities for BYD Co and Jiugui Liquor

0.24

Correlation Coefficient

BYD Co  Jiugui Liquor

Modest diversification

The 3 months correlation between BYD and Jiugui is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Jiugui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiugui Liquor 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 Jiugui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiugui Liquor has no effect on the direction of BYD Co i.e., BYD Co and Jiugui Liquor go up and down completely randomly.

Pair Corralation between BYD Co and Jiugui Liquor

Assuming the 90 days trading horizon BYD Co Ltd is expected to generate 0.74 times more return on investment than Jiugui Liquor. However, BYD Co Ltd is 1.35 times less risky than Jiugui Liquor. It trades about 0.0 of its potential returns per unit of risk. Jiugui Liquor Co is currently generating about -0.07 per unit of risk. If you would invest  29,932  in BYD Co Ltd on October 23, 2024 and sell it today you would lose (1,489) from holding BYD Co Ltd or give up 4.97% of portfolio value over 90 days.

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

BYD Co Ltd  vs.  Jiugui Liquor Co

BYD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BYD Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jiugui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiugui Liquor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiugui Liquor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BYD Co and Jiugui Liquor

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

The idea behind BYD Co Ltd and Jiugui Liquor Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.