Correlation Between BYD Co and Ningbo Tech

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

Diversification Opportunities for BYD Co and Ningbo Tech

-0.05

Correlation Coefficient

BYD Co  Ningbo Tech

Good diversification

The 3 months correlation between BYD and Ningbo is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Ningbo Tech Bank Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Tech Bank 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 Ningbo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Tech Bank has no effect on the direction of BYD Co i.e., BYD Co and Ningbo Tech go up and down completely randomly.

Pair Corralation between BYD Co and Ningbo Tech

Assuming the 90 days trading horizon BYD Co is expected to generate 2.0 times less return on investment than Ningbo Tech. But when comparing it to its historical volatility, BYD Co Ltd is 1.22 times less risky than Ningbo Tech. It trades about 0.05 of its potential returns per unit of risk. Ningbo Tech Bank Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  283.00  in Ningbo Tech Bank Co on October 23, 2024 and sell it today you would earn a total of  8.00  from holding Ningbo Tech Bank Co or generate 2.83% return on investment over 90 days.

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

BYD Co Ltd  vs.  Ningbo Tech Bank 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.

Ningbo Tech Bank

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Tech Bank Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Tech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BYD Co and Ningbo Tech

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

The idea behind BYD Co Ltd and Ningbo Tech Bank 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.