Correlation Between Fujian Longzhou and BYD Co

Can any of the company-specific risk be diversified away by investing in both Fujian Longzhou and BYD Co 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 Fujian Longzhou and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fujian Longzhou Transportation and BYD Co Ltd, you can compare the effects of market volatilities on Fujian Longzhou and BYD Co 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 Fujian Longzhou with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujian Longzhou and BYD Co.

Diversification Opportunities for Fujian Longzhou and BYD Co

0.0

Correlation Coefficient

Fujian Longzhou  BYD Co

Pay attention - limited upside

The 3 months correlation between Fujian and BYD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fujian Longzhou Transportation and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Fujian Longzhou 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 Fujian Longzhou Transportation are associated (or correlated) with BYD Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of Fujian Longzhou i.e., Fujian Longzhou and BYD Co go up and down completely randomly.

Pair Corralation between Fujian Longzhou and BYD Co

Assuming the 90 days trading horizon Fujian Longzhou Transportation is expected to generate 1.95 times more return on investment than BYD Co. However, Fujian Longzhou is 1.95 times more volatile than BYD Co Ltd. It trades about 0.01 of its potential returns per unit of risk. BYD Co Ltd is currently generating about 0.0 per unit of risk. If you would invest  485.00  in Fujian Longzhou Transportation on October 25, 2024 and sell it today you would lose (75.00) from holding Fujian Longzhou Transportation or give up 15.46% of portfolio value over 90 days.

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

Fujian Longzhou Transportation  vs.  BYD Co Ltd

Fujian Longzhou Tran

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Fujian Longzhou Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fujian Longzhou is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Fujian Longzhou and BYD Co

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

The idea behind Fujian Longzhou Transportation and BYD Co Ltd 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.