Correlation Between BYD and Liberty Media

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

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

Diversification Opportunities for BYD and Liberty Media

-0.08

Correlation Coefficient

BYD  Liberty Media

Good diversification

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

Pair Corralation between BYD and Liberty Media

Assuming the 90 days trading horizon BYD Co is expected to generate 3.59 times more return on investment than Liberty Media. However, BYD is 3.59 times more volatile than Liberty Media Corp. It trades about 0.06 of its potential returns per unit of risk. Liberty Media Corp is currently generating about -0.05 per unit of risk. If you would invest  3,456  in BYD Co on October 10, 2024 and sell it today you would earn a total of  104.00  from holding BYD Co or generate 3.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

BYD Co  vs.  Liberty Media Corp

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.

Liberty Media Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Liberty Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BYD and Liberty Media

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

The idea behind BYD Co and Liberty Media Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.