Correlation Between BYD Co and Xizi Clean

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

Diversification Opportunities for BYD Co and Xizi Clean

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between BYD and Xizi is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Xizi Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xizi Clean Energy 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 Xizi Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xizi Clean Energy has no effect on the direction of BYD Co i.e., BYD Co and Xizi Clean go up and down completely randomly.

Pair Corralation between BYD Co and Xizi Clean

Assuming the 90 days trading horizon BYD Co Ltd is expected to generate 1.11 times more return on investment than Xizi Clean. However, BYD Co is 1.11 times more volatile than Xizi Clean Energy. It trades about 0.18 of its potential returns per unit of risk. Xizi Clean Energy is currently generating about 0.13 per unit of risk. If you would invest  28,842  in BYD Co Ltd on December 24, 2024 and sell it today you would earn a total of  8,358  from holding BYD Co Ltd or generate 28.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BYD Co Ltd  vs.  Xizi Clean Energy

 Performance 
       Timeline  
BYD Co 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BYD Co sustained solid returns over the last few months and may actually be approaching a breakup point.
Xizi Clean Energy 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Xizi Clean Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xizi Clean sustained solid returns over the last few months and may actually be approaching a breakup point.

BYD Co and Xizi Clean Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BYD Co and Xizi Clean

The main advantage of trading using opposite BYD Co and Xizi Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Co position performs unexpectedly, Xizi Clean 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 Xizi Clean will offset losses from the drop in Xizi Clean's long position.
The idea behind BYD Co Ltd and Xizi Clean Energy 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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