Correlation Between BYD and Sunny Optical

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

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

Diversification Opportunities for BYD and Sunny Optical

-0.09

Correlation Coefficient

BYD  Sunny Optical

Good diversification

The 3 months correlation between BYD and Sunny is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of BYD i.e., BYD and Sunny Optical go up and down completely randomly.

Pair Corralation between BYD and Sunny Optical

Assuming the 90 days trading horizon BYD Co is expected to generate 2.98 times more return on investment than Sunny Optical. However, BYD is 2.98 times more volatile than Sunny Optical Technology. It trades about 0.07 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.05 per unit of risk. If you would invest  2,130  in BYD Co on October 24, 2024 and sell it today you would earn a total of  1,430  from holding BYD Co or generate 67.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.79%
Values	Daily Returns

BYD Co  vs.  Sunny Optical Technology

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 uncertain basic indicators, BYD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sunny Optical Technology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sunny Optical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BYD and Sunny Optical

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

The idea behind BYD Co and Sunny Optical Technology 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.