Correlation Between BYD Co and Jiangxi Naipu

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

Diversification Opportunities for BYD Co and Jiangxi Naipu

0.4

Correlation Coefficient

BYD Co  Jiangxi Naipu

Very weak diversification

The 3 months correlation between BYD and Jiangxi is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining 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 Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of BYD Co i.e., BYD Co and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between BYD Co and Jiangxi Naipu

Assuming the 90 days trading horizon BYD Co is expected to generate 14.98 times less return on investment than Jiangxi Naipu. But when comparing it to its historical volatility, BYD Co Ltd is 1.46 times less risky than Jiangxi Naipu. It trades about 0.01 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,554  in Jiangxi Naipu Mining on October 24, 2024 and sell it today you would earn a total of  1,133  from holding Jiangxi Naipu Mining or generate 72.91% return on investment over 90 days.

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

BYD Co Ltd  vs.  Jiangxi Naipu Mining

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 somewhat strong basic indicators, BYD Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jiangxi Naipu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Naipu Mining 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.

Pair Trading with BYD Co and Jiangxi Naipu

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

The idea behind BYD Co Ltd and Jiangxi Naipu Mining 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.