Correlation Between BAIC MotorLimited and Zapp Electric

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

By analyzing existing cross correlation between BAIC Motor and Zapp Electric Vehicles, you can compare the effects of market volatilities on BAIC MotorLimited and Zapp Electric 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 BAIC MotorLimited with a short position of Zapp Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAIC MotorLimited and Zapp Electric.

Diversification Opportunities for BAIC MotorLimited and Zapp Electric

-0.35

Correlation Coefficient

BAIC MotorLimited  Zapp Electric

Very good diversification

The 3 months correlation between BAIC and Zapp is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding BAIC Motor and Zapp Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapp Electric Vehicles and BAIC MotorLimited 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 BAIC Motor are associated (or correlated) with Zapp Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapp Electric Vehicles has no effect on the direction of BAIC MotorLimited i.e., BAIC MotorLimited and Zapp Electric go up and down completely randomly.

Pair Corralation between BAIC MotorLimited and Zapp Electric

Assuming the 90 days horizon BAIC Motor is expected to generate 1.09 times more return on investment than Zapp Electric. However, BAIC MotorLimited is 1.09 times more volatile than Zapp Electric Vehicles. It trades about 0.05 of its potential returns per unit of risk. Zapp Electric Vehicles is currently generating about -0.2 per unit of risk. If you would invest  27.00  in BAIC Motor on September 3, 2024 and sell it today you would earn a total of  3.00  from holding BAIC Motor or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BAIC Motor  vs.  Zapp Electric Vehicles

BAIC MotorLimited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BAIC Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, BAIC MotorLimited reported solid returns over the last few months and may actually be approaching a breakup point.

Zapp Electric Vehicles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zapp Electric Vehicles has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with BAIC MotorLimited and Zapp Electric

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

The idea behind BAIC Motor and Zapp Electric Vehicles 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.