Correlation Between BYD Co and Automatic Data

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

By analyzing existing cross correlation between BYD Co and Automatic Data Processing, you can compare the effects of market volatilities on BYD Co and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Co and Automatic Data.

Diversification Opportunities for BYD Co and Automatic Data

0.49

Correlation Coefficient

BYD Co  Automatic Data

Very weak diversification

The 3 months correlation between BYD and Automatic is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 are associated (or correlated) with Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of BYD Co i.e., BYD Co and Automatic Data go up and down completely randomly.

Pair Corralation between BYD Co and Automatic Data

Assuming the 90 days trading horizon BYD Co is expected to generate 10.33 times more return on investment than Automatic Data. However, BYD Co is 10.33 times more volatile than Automatic Data Processing. It trades about 0.04 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.12 per unit of risk. If you would invest  3,560  in BYD Co on December 4, 2024 and sell it today you would earn a total of  0.00  from holding BYD Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

BYD Co  vs.  Automatic Data Processing

BYD Co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BYD Co unveiled solid returns over the last few months and may actually be approaching a breakup point.

Automatic Data Processing

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Automatic Data is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BYD Co and Automatic Data

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

The idea behind BYD Co and Automatic Data Processing 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.