Correlation Between CAP LEASE and BYD Co

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

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

Diversification Opportunities for CAP LEASE and BYD Co

-0.08

Correlation Coefficient

CAP LEASE  BYD Co

Good diversification

The 3 months correlation between CAP and BYD is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding CAP LEASE AVIATION and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and CAP LEASE 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 CAP LEASE AVIATION are associated (or correlated) with BYD Co. 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 CAP LEASE i.e., CAP LEASE and BYD Co go up and down completely randomly.

Pair Corralation between CAP LEASE and BYD Co

Assuming the 90 days trading horizon CAP LEASE AVIATION is expected to under-perform the BYD Co. But the stock apears to be less risky and, when comparing its historical volatility, CAP LEASE AVIATION is 2.85 times less risky than BYD Co. The stock trades about -0.09 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  3,560  in BYD Co on December 28, 2024 and sell it today you would earn a total of  0.00  from holding BYD Co or generate 0.0% return on investment over 90 days.

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

CAP LEASE AVIATION  vs.  BYD Co

CAP LEASE AVIATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAP LEASE AVIATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental 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.

BYD Co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BYD Co unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAP LEASE and BYD Co

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

The idea behind CAP LEASE AVIATION 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.