Correlation Between King Strong and BYD Co

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

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

Diversification Opportunities for King Strong and BYD Co

0.26

Correlation Coefficient

King Strong  BYD Co

Modest diversification

The 3 months correlation between King and BYD is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and King Strong 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 King Strong New Material are associated (or correlated) with BYD Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of King Strong i.e., King Strong and BYD Co go up and down completely randomly.

Pair Corralation between King Strong and BYD Co

Assuming the 90 days trading horizon King Strong New Material is expected to generate 2.04 times more return on investment than BYD Co. However, King Strong is 2.04 times more volatile than BYD Co Ltd. It trades about -0.02 of its potential returns per unit of risk. BYD Co Ltd is currently generating about -0.07 per unit of risk. If you would invest  2,101  in King Strong New Material on October 25, 2024 and sell it today you would lose (142.00) from holding King Strong New Material or give up 6.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

King Strong New Material  vs.  BYD Co Ltd

King Strong New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days King Strong New Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, King Strong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BYD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BYD Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with King Strong and BYD Co

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

The idea behind King Strong New Material and BYD Co Ltd 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.