Correlation Between BYD Co and Lucid

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

Diversification Opportunities for BYD Co and Lucid

-0.56

Correlation Coefficient

BYD Co  Lucid

Excellent diversification

The 3 months correlation between BYD and Lucid is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Lucid Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucid Group 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 Lucid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucid Group has no effect on the direction of BYD Co i.e., BYD Co and Lucid go up and down completely randomly.

Pair Corralation between BYD Co and Lucid

Assuming the 90 days horizon BYD Co Ltd is expected to generate 0.73 times more return on investment than Lucid. However, BYD Co Ltd is 1.38 times less risky than Lucid. It trades about 0.23 of its potential returns per unit of risk. Lucid Group is currently generating about -0.07 per unit of risk. If you would invest  6,853  in BYD Co Ltd on December 28, 2024 and sell it today you would earn a total of  3,757  from holding BYD Co Ltd or generate 54.82% 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.  Lucid Group

BYD Co

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, BYD Co showed solid returns over the last few months and may actually be approaching a breakup point.

Lucid Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lucid Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with BYD Co and Lucid

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

The idea behind BYD Co Ltd and Lucid 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.