Correlation Between Kinnevik Investment and BYD

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

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

Diversification Opportunities for Kinnevik Investment and BYD

0.01

Correlation Coefficient

Kinnevik Investment  BYD

Significant diversification

The 3 months correlation between Kinnevik and BYD is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kinnevik Investment AB and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Kinnevik Investment 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 Kinnevik Investment AB are associated (or correlated) with BYD. 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 Kinnevik Investment i.e., Kinnevik Investment and BYD go up and down completely randomly.

Pair Corralation between Kinnevik Investment and BYD

Assuming the 90 days trading horizon Kinnevik Investment is expected to generate 21.61 times less return on investment than BYD. But when comparing it to its historical volatility, Kinnevik Investment AB is 2.11 times less risky than BYD. It trades about 0.01 of its potential returns per unit of risk. BYD Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,341  in BYD Co on October 11, 2024 and sell it today you would earn a total of  219.00  from holding BYD Co or generate 6.55% return on investment over 90 days.

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

Kinnevik Investment AB  vs.  BYD Co

Kinnevik Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Kinnevik Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BYD Co

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BYD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kinnevik Investment and BYD

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

The idea behind Kinnevik Investment AB and BYD 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.