Correlation Between BYD Co and Global Partners

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

Diversification Opportunities for BYD Co and Global Partners

-0.71

Correlation Coefficient

BYD Co  Global Partners

Pay attention - limited upside

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

Pair Corralation between BYD Co and Global Partners

Assuming the 90 days horizon BYD Co Ltd is expected to generate 5.5 times more return on investment than Global Partners. However, BYD Co is 5.5 times more volatile than Global Partners LP. It trades about 0.03 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.11 per unit of risk. If you would invest  5,794  in BYD Co Ltd on October 4, 2024 and sell it today you would earn a total of  1,009  from holding BYD Co Ltd or generate 17.41% return on investment over 90 days.

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

BYD Co Ltd  vs.  Global Partners LP

BYD Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BYD Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Global Partners LP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BYD Co and Global Partners

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

The idea behind BYD Co Ltd and Global Partners LP 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.