Correlation Between BYD Company and Standard Lithium

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both BYD Company and Standard Lithium 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 Company and Standard Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BYD Company Limited and Standard Lithium, you can compare the effects of market volatilities on BYD Company and Standard Lithium 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 Company with a short position of Standard Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and Standard Lithium.

Diversification Opportunities for BYD Company and Standard Lithium

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between BYD and Standard is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Standard Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Lithium and BYD Company 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 Company Limited are associated (or correlated) with Standard Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Lithium has no effect on the direction of BYD Company i.e., BYD Company and Standard Lithium go up and down completely randomly.

Pair Corralation between BYD Company and Standard Lithium

Assuming the 90 days horizon BYD Company Limited is expected to generate 0.85 times more return on investment than Standard Lithium. However, BYD Company Limited is 1.18 times less risky than Standard Lithium. It trades about 0.03 of its potential returns per unit of risk. Standard Lithium is currently generating about -0.18 per unit of risk. If you would invest  3,266  in BYD Company Limited on September 18, 2024 and sell it today you would earn a total of  34.00  from holding BYD Company Limited or generate 1.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

BYD Company Limited  vs.  Standard Lithium

 Performance 
       Timeline  
BYD Limited 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BYD Company Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BYD Company reported solid returns over the last few months and may actually be approaching a breakup point.
Standard Lithium 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Standard Lithium are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Standard Lithium reported solid returns over the last few months and may actually be approaching a breakup point.

BYD Company and Standard Lithium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BYD Company and Standard Lithium

The main advantage of trading using opposite BYD Company and Standard Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BYD Company position performs unexpectedly, Standard Lithium 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 Standard Lithium will offset losses from the drop in Standard Lithium's long position.
The idea behind BYD Company Limited and Standard Lithium 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.
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

Other Complementary Tools

ETF Categories
List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Transaction History
View history of all your transactions and understand their impact on performance
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device