Correlation Between BYD and Travel Leisure

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

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

Diversification Opportunities for BYD and Travel Leisure

-0.1

Correlation Coefficient

BYD  Travel Leisure

Good diversification

The 3 months correlation between BYD and Travel is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Travel Leisure Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travel Leisure 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 Travel Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travel Leisure has no effect on the direction of BYD i.e., BYD and Travel Leisure go up and down completely randomly.

Pair Corralation between BYD and Travel Leisure

Assuming the 90 days trading horizon BYD Co is expected to generate 2.14 times more return on investment than Travel Leisure. However, BYD is 2.14 times more volatile than Travel Leisure Co. It trades about 0.03 of its potential returns per unit of risk. Travel Leisure Co is currently generating about 0.02 per unit of risk. If you would invest  3,560  in BYD Co on October 25, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BYD Co  vs.  Travel Leisure Co

BYD Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, BYD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Travel Leisure

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with BYD and Travel Leisure

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

The idea behind BYD Co and Travel Leisure 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.