Correlation Between BYD Co and Jinhui Liquor

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

Diversification Opportunities for BYD Co and Jinhui Liquor

0.31

Correlation Coefficient

BYD Co  Jinhui Liquor

Weak diversification

The 3 months correlation between BYD and Jinhui is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Jinhui Liquor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinhui Liquor 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 Jinhui Liquor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinhui Liquor has no effect on the direction of BYD Co i.e., BYD Co and Jinhui Liquor go up and down completely randomly.

Pair Corralation between BYD Co and Jinhui Liquor

Assuming the 90 days trading horizon BYD Co Ltd is expected to generate 0.81 times more return on investment than Jinhui Liquor. However, BYD Co Ltd is 1.24 times less risky than Jinhui Liquor. It trades about 0.08 of its potential returns per unit of risk. Jinhui Liquor Co is currently generating about 0.0 per unit of risk. If you would invest  21,039  in BYD Co Ltd on October 8, 2024 and sell it today you would earn a total of  6,034  from holding BYD Co Ltd or generate 28.68% return on investment over 90 days.

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

BYD Co Ltd  vs.  Jinhui Liquor Co

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.

Jinhui Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jinhui Liquor Co 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.

Pair Trading with BYD Co and Jinhui Liquor

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

The idea behind BYD Co Ltd and Jinhui Liquor Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.