Correlation Between BYD Company and OtelloASA

Can any of the company-specific risk be diversified away by investing in both BYD Company and OtelloASA 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 OtelloASA 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 Otello ASA, you can compare the effects of market volatilities on BYD Company and OtelloASA 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 OtelloASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Company and OtelloASA.

Diversification Opportunities for BYD Company and OtelloASA

0.2

Correlation Coefficient

BYD Company  OtelloASA

Modest diversification

The 3 months correlation between BYD and OtelloASA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA 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 OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of BYD Company i.e., BYD Company and OtelloASA go up and down completely randomly.

Pair Corralation between BYD Company and OtelloASA

Assuming the 90 days trading horizon BYD Company Limited is expected to generate 2.33 times more return on investment than OtelloASA. However, BYD Company is 2.33 times more volatile than Otello ASA. It trades about 0.18 of its potential returns per unit of risk. Otello ASA is currently generating about 0.13 per unit of risk. If you would invest  6,550  in BYD Company Limited on December 29, 2024 and sell it today you would earn a total of  3,150  from holding BYD Company Limited or generate 48.09% return on investment over 90 days.

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

BYD Company Limited  vs.  Otello ASA

BYD Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Company Limited are ranked lower than 14 (%) 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.

Otello ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OtelloASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BYD Company and OtelloASA

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

The idea behind BYD Company Limited and Otello ASA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..