Correlation Between BYD Co and Xingguang Agricultural

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

Diversification Opportunities for BYD Co and Xingguang Agricultural

0.08

Correlation Coefficient

BYD Co  Xingguang Agricultural

Significant diversification

The 3 months correlation between BYD and Xingguang is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Xingguang Agricultural Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingguang Agricultural 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 Xingguang Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingguang Agricultural has no effect on the direction of BYD Co i.e., BYD Co and Xingguang Agricultural go up and down completely randomly.

Pair Corralation between BYD Co and Xingguang Agricultural

Assuming the 90 days trading horizon BYD Co Ltd is expected to generate 0.53 times more return on investment than Xingguang Agricultural. However, BYD Co Ltd is 1.9 times less risky than Xingguang Agricultural. It trades about -0.04 of its potential returns per unit of risk. Xingguang Agricultural Mach is currently generating about -0.29 per unit of risk. If you would invest  28,070  in BYD Co Ltd on October 22, 2024 and sell it today you would lose (410.00) from holding BYD Co Ltd or give up 1.46% of portfolio value over 90 days.

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

BYD Co Ltd  vs.  Xingguang Agricultural Mach

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 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.

Xingguang Agricultural

Risk-Adjusted Performance

0 of 100

Weak

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

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

The idea behind BYD Co Ltd and Xingguang Agricultural Mach 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.