Correlation Between BYD and Technicolor

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

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

Diversification Opportunities for BYD and Technicolor

0.04

Correlation Coefficient

BYD  Technicolor

Significant diversification

The 3 months correlation between BYD and Technicolor is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Technicolor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technicolor 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 Technicolor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technicolor has no effect on the direction of BYD i.e., BYD and Technicolor go up and down completely randomly.

Pair Corralation between BYD and Technicolor

Assuming the 90 days trading horizon BYD Co is expected to generate 1.9 times more return on investment than Technicolor. However, BYD is 1.9 times more volatile than Technicolor. It trades about 0.05 of its potential returns per unit of risk. Technicolor is currently generating about 0.01 per unit of risk. If you would invest  3,456  in BYD Co on October 9, 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BYD Co  vs.  Technicolor

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.

Technicolor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Technicolor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Technicolor 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 and Technicolor

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

The idea behind BYD Co and Technicolor 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.