Correlation Between BYD Co and HanS Laser

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

Diversification Opportunities for BYD Co and HanS Laser

0.21

Correlation Coefficient

BYD Co  HanS Laser

Modest diversification

The 3 months correlation between BYD and HanS is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and HanS Laser Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HanS Laser Tech 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 HanS Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HanS Laser Tech has no effect on the direction of BYD Co i.e., BYD Co and HanS Laser go up and down completely randomly.

Pair Corralation between BYD Co and HanS Laser

Assuming the 90 days trading horizon BYD Co Ltd is expected to under-perform the HanS Laser. But the stock apears to be less risky and, when comparing its historical volatility, BYD Co Ltd is 1.56 times less risky than HanS Laser. The stock trades about -0.07 of its potential returns per unit of risk. The HanS Laser Tech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,442  in HanS Laser Tech on October 23, 2024 and sell it today you would earn a total of  101.00  from holding HanS Laser Tech or generate 4.14% return on investment over 90 days.

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

BYD Co Ltd  vs.  HanS Laser Tech

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.

HanS Laser Tech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HanS Laser Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HanS Laser 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 HanS Laser

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

The idea behind BYD Co Ltd and HanS Laser Tech 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.