Correlation Between BYD Co and Dongguan Tarry

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

Diversification Opportunities for BYD Co and Dongguan Tarry

-0.15

Correlation Coefficient

BYD Co  Dongguan Tarry

Good diversification

The 3 months correlation between BYD and Dongguan is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Dongguan Tarry Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Tarry Elect 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 Dongguan Tarry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Tarry Elect has no effect on the direction of BYD Co i.e., BYD Co and Dongguan Tarry go up and down completely randomly.

Pair Corralation between BYD Co and Dongguan Tarry

Assuming the 90 days trading horizon BYD Co is expected to generate 1.26 times less return on investment than Dongguan Tarry. But when comparing it to its historical volatility, BYD Co Ltd is 1.88 times less risky than Dongguan Tarry. It trades about 0.08 of its potential returns per unit of risk. Dongguan Tarry Electronics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,610  in Dongguan Tarry Electronics on October 6, 2024 and sell it today you would earn a total of  1,869  from holding Dongguan Tarry Electronics or generate 40.54% 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.  Dongguan Tarry Electronics

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.

Dongguan Tarry Elect

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongguan Tarry Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongguan Tarry 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 Dongguan Tarry

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

The idea behind BYD Co Ltd and Dongguan Tarry Electronics 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.