Correlation Between BYD Co and Innovative Medical

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

Diversification Opportunities for BYD Co and Innovative Medical

-0.02

Correlation Coefficient

BYD Co  Innovative Medical

Good diversification

The 3 months correlation between BYD and Innovative is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Innovative Medical Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Medical 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 Innovative Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Medical has no effect on the direction of BYD Co i.e., BYD Co and Innovative Medical go up and down completely randomly.

Pair Corralation between BYD Co and Innovative Medical

Assuming the 90 days trading horizon BYD Co is expected to generate 1.74 times less return on investment than Innovative Medical. But when comparing it to its historical volatility, BYD Co Ltd is 1.71 times less risky than Innovative Medical. It trades about 0.07 of its potential returns per unit of risk. Innovative Medical Management is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  649.00  in Innovative Medical Management on October 2, 2024 and sell it today you would earn a total of  185.00  from holding Innovative Medical Management or generate 28.51% 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.  Innovative Medical Management

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Innovative Medical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Medical Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Innovative Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BYD Co and Innovative Medical

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

The idea behind BYD Co Ltd and Innovative Medical Management 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.