Correlation Between Canadian General and BYD

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

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

Diversification Opportunities for Canadian General and BYD

-0.24

Correlation Coefficient

Canadian General  BYD

Very good diversification

The 3 months correlation between Canadian and BYD is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Canadian General 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 Canadian General Investments are associated (or correlated) with BYD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Co has no effect on the direction of Canadian General i.e., Canadian General and BYD go up and down completely randomly.

Pair Corralation between Canadian General and BYD

Assuming the 90 days trading horizon Canadian General Investments is expected to under-perform the BYD. But the stock apears to be less risky and, when comparing its historical volatility, Canadian General Investments is 4.55 times less risky than BYD. The stock trades about -0.25 of its potential returns per unit of risk. The BYD Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,456  in BYD Co on October 8, 2024 and sell it today you would earn a total of  104.00  from holding BYD Co or generate 3.01% return on investment over 90 days.

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

Canadian General Investments  vs.  BYD Co

Canadian General Inv

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian General Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Canadian General may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BYD Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BYD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Canadian General and BYD

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

The idea behind Canadian General Investments and BYD Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.