Correlation Between Ningbo Fujia and BYD Co

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Can any of the company-specific risk be diversified away by investing in both Ningbo Fujia 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 Ningbo Fujia and BYD Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ningbo Fujia Industrial and BYD Co Ltd, you can compare the effects of market volatilities on Ningbo Fujia 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 Ningbo Fujia with a short position of BYD Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Fujia and BYD Co.

Diversification Opportunities for Ningbo Fujia and BYD Co

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between Ningbo and BYD is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Fujia Industrial and BYD Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Ningbo Fujia 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 Ningbo Fujia Industrial 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 Ningbo Fujia i.e., Ningbo Fujia and BYD Co go up and down completely randomly.

Pair Corralation between Ningbo Fujia and BYD Co

Assuming the 90 days trading horizon Ningbo Fujia Industrial is expected to generate 1.73 times more return on investment than BYD Co. However, Ningbo Fujia is 1.73 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 -0.1 per unit of risk. If you would invest  1,463  in Ningbo Fujia Industrial on October 2, 2024 and sell it today you would earn a total of  21.00  from holding Ningbo Fujia Industrial or generate 1.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Ningbo Fujia Industrial  vs.  BYD Co Ltd

 Performance 
       Timeline  
Ningbo Fujia Industrial 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Fujia Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ningbo Fujia 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

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ningbo Fujia and BYD Co Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ningbo Fujia and BYD Co

The main advantage of trading using opposite Ningbo Fujia and BYD Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Fujia 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 Ningbo Fujia Industrial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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