Correlation Between KAUFMAN ET and BYD ELECTRONIC
Can any of the company-specific risk be diversified away by investing in both KAUFMAN ET and BYD ELECTRONIC 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 KAUFMAN ET and BYD ELECTRONIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAUFMAN ET BROAD and BYD ELECTRONIC, you can compare the effects of market volatilities on KAUFMAN ET and BYD ELECTRONIC 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 KAUFMAN ET with a short position of BYD ELECTRONIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAUFMAN ET and BYD ELECTRONIC.
Diversification Opportunities for KAUFMAN ET and BYD ELECTRONIC
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KAUFMAN and BYD is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding KAUFMAN ET BROAD and BYD ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD ELECTRONIC and KAUFMAN ET 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 KAUFMAN ET BROAD are associated (or correlated) with BYD ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD ELECTRONIC has no effect on the direction of KAUFMAN ET i.e., KAUFMAN ET and BYD ELECTRONIC go up and down completely randomly.
Pair Corralation between KAUFMAN ET and BYD ELECTRONIC
Assuming the 90 days trading horizon KAUFMAN ET is expected to generate 6.99 times less return on investment than BYD ELECTRONIC. But when comparing it to its historical volatility, KAUFMAN ET BROAD is 3.73 times less risky than BYD ELECTRONIC. It trades about 0.06 of its potential returns per unit of risk. BYD ELECTRONIC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 461.00 in BYD ELECTRONIC on December 1, 2024 and sell it today you would earn a total of 162.00 from holding BYD ELECTRONIC or generate 35.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
KAUFMAN ET BROAD vs. BYD ELECTRONIC
Performance |
Timeline |
KAUFMAN ET BROAD |
BYD ELECTRONIC |
KAUFMAN ET and BYD ELECTRONIC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KAUFMAN ET and BYD ELECTRONIC
The main advantage of trading using opposite KAUFMAN ET and BYD ELECTRONIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAUFMAN ET position performs unexpectedly, BYD ELECTRONIC 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 ELECTRONIC will offset losses from the drop in BYD ELECTRONIC's long position.The idea behind KAUFMAN ET BROAD and BYD ELECTRONIC 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.BYD ELECTRONIC vs. Samsung Electronics Co | BYD ELECTRONIC vs. STMICROELECTRONICS | BYD ELECTRONIC vs. Renesas Electronics | BYD ELECTRONIC vs. STMicroelectronics NV |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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