Correlation Between Impax Asset and BYD

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

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

Diversification Opportunities for Impax Asset and BYD

0.11

Correlation Coefficient

Impax Asset  BYD

Average diversification

The 3 months correlation between Impax and BYD is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Impax Asset Management and BYD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Co and Impax Asset 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 Impax Asset Management 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 Impax Asset i.e., Impax Asset and BYD go up and down completely randomly.

Pair Corralation between Impax Asset and BYD

Assuming the 90 days trading horizon Impax Asset Management is expected to under-perform the BYD. But the stock apears to be less risky and, when comparing its historical volatility, Impax Asset Management is 1.46 times less risky than BYD. The stock trades about -0.22 of its potential returns per unit of risk. The BYD Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,558  in BYD Co on October 26, 2024 and sell it today you would earn a total of  2.00  from holding BYD Co or generate 0.06% return on investment over 90 days.

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

Impax Asset Management  vs.  BYD Co

Impax Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

BYD Co

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days BYD Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Impax Asset and BYD

The main advantage of trading using opposite Impax Asset and BYD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impax Asset 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 Impax Asset Management 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.