Correlation Between BYD and Lundin Mining

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

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

Diversification Opportunities for BYD and Lundin Mining

-0.01

Correlation Coefficient

BYD  Lundin Mining

Good diversification

The 3 months correlation between BYD and Lundin is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Lundin Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lundin Mining 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 Lundin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lundin Mining Corp has no effect on the direction of BYD i.e., BYD and Lundin Mining go up and down completely randomly.

Pair Corralation between BYD and Lundin Mining

Assuming the 90 days trading horizon BYD Co is expected to generate 2.25 times more return on investment than Lundin Mining. However, BYD is 2.25 times more volatile than Lundin Mining Corp. It trades about 0.03 of its potential returns per unit of risk. Lundin Mining Corp is currently generating about -0.09 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.  Lundin Mining Corp

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.

Lundin Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lundin Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BYD and Lundin Mining

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

The idea behind BYD Co and Lundin Mining 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.