Correlation Between BYD Co and Daiwa Securities

Can any of the company-specific risk be diversified away by investing in both BYD Co and Daiwa Securities 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 Co and Daiwa Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BYD Co Ltd and Daiwa Securities Group, you can compare the effects of market volatilities on BYD Co and Daiwa Securities 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 Co with a short position of Daiwa Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of BYD Co and Daiwa Securities.

Diversification Opportunities for BYD Co and Daiwa Securities

-0.41

Correlation Coefficient

BYD Co  Daiwa Securities

Very good diversification

The 3 months correlation between BYD and Daiwa is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Daiwa Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa Securities and BYD Co 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 Co Ltd are associated (or correlated) with Daiwa Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa Securities has no effect on the direction of BYD Co i.e., BYD Co and Daiwa Securities go up and down completely randomly.

Pair Corralation between BYD Co and Daiwa Securities

Assuming the 90 days horizon BYD Co Ltd is expected to generate 1.05 times more return on investment than Daiwa Securities. However, BYD Co is 1.05 times more volatile than Daiwa Securities Group. It trades about 0.09 of its potential returns per unit of risk. Daiwa Securities Group is currently generating about -0.27 per unit of risk. If you would invest  6,666  in BYD Co Ltd on September 26, 2024 and sell it today you would earn a total of  267.00  from holding BYD Co Ltd or generate 4.01% return on investment over 90 days.

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

BYD Co Ltd  vs.  Daiwa Securities Group

BYD Co

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, BYD Co is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Daiwa Securities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BYD Co and Daiwa Securities

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

The idea behind BYD Co Ltd and Daiwa Securities Group 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.