Correlation Between Hansa Investment and BYD

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

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

Diversification Opportunities for Hansa Investment and BYD

-0.04

Correlation Coefficient

Hansa Investment  BYD

Good diversification

The 3 months correlation between Hansa and BYD is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Hansa Investment and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Hansa Investment 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 Hansa Investment 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 Hansa Investment i.e., Hansa Investment and BYD go up and down completely randomly.

Pair Corralation between Hansa Investment and BYD

Assuming the 90 days trading horizon Hansa Investment is expected to generate 7.93 times less return on investment than BYD. But when comparing it to its historical volatility, Hansa Investment is 7.92 times less risky than BYD. It trades about 0.06 of its potential returns per unit of risk. 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 October 8, 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

Hansa Investment  vs.  BYD Co

Hansa Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hansa Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hansa Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 unsteady basic indicators, BYD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hansa Investment and BYD

The main advantage of trading using opposite Hansa Investment and BYD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hansa Investment 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 Hansa Investment 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.