Correlation Between BYD Co and Reunion Neuroscience

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

Diversification Opportunities for BYD Co and Reunion Neuroscience

-0.47

Correlation Coefficient

BYD Co  Reunion Neuroscience

Very good diversification

The 3 months correlation between BYD and Reunion is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Reunion Neuroscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reunion Neuroscience 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 Reunion Neuroscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reunion Neuroscience has no effect on the direction of BYD Co i.e., BYD Co and Reunion Neuroscience go up and down completely randomly.

Pair Corralation between BYD Co and Reunion Neuroscience

If you would invest  5,454  in BYD Co Ltd on September 24, 2024 and sell it today you would earn a total of  1,456  from holding BYD Co Ltd or generate 26.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.6%
Values	Daily Returns

BYD Co Ltd  vs.  Reunion Neuroscience

BYD Co

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, BYD Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Reunion Neuroscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reunion Neuroscience has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Reunion Neuroscience is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with BYD Co and Reunion Neuroscience

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

The idea behind BYD Co Ltd and Reunion Neuroscience 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.