Correlation Between BYD Co and Tongding Interconnection

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

Diversification Opportunities for BYD Co and Tongding Interconnection

-0.48

Correlation Coefficient

BYD Co  Tongding Interconnection

Very good diversification

The 3 months correlation between BYD and Tongding is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Tongding Interconnection Infor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tongding Interconnection 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 Tongding Interconnection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tongding Interconnection has no effect on the direction of BYD Co i.e., BYD Co and Tongding Interconnection go up and down completely randomly.

Pair Corralation between BYD Co and Tongding Interconnection

Assuming the 90 days trading horizon BYD Co Ltd is expected to generate 0.27 times more return on investment than Tongding Interconnection. However, BYD Co Ltd is 3.7 times less risky than Tongding Interconnection. It trades about -0.11 of its potential returns per unit of risk. Tongding Interconnection Information is currently generating about -0.08 per unit of risk. If you would invest  28,049  in BYD Co Ltd on October 8, 2024 and sell it today you would lose (976.00) from holding BYD Co Ltd or give up 3.48% of portfolio value over 90 days.

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

BYD Co Ltd  vs.  Tongding Interconnection Infor

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tongding Interconnection

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tongding Interconnection Information are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Tongding Interconnection 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 Tongding Interconnection

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

The idea behind BYD Co Ltd and Tongding Interconnection Information 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.