Correlation Between BYD Company and Electrameccanica

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

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

Diversification Opportunities for BYD Company and Electrameccanica

-0.27

Correlation Coefficient

BYD Company  Electrameccanica

Very good diversification

The 3 months correlation between BYD and Electrameccanica is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding BYD Company Limited and Electrameccanica Vehicles Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrameccanica Veh and BYD Company 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 Company Limited are associated (or correlated) with Electrameccanica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrameccanica Veh has no effect on the direction of BYD Company i.e., BYD Company and Electrameccanica go up and down completely randomly.

Pair Corralation between BYD Company and Electrameccanica

Assuming the 90 days horizon BYD Company Limited is expected to generate 0.62 times more return on investment than Electrameccanica. However, BYD Company Limited is 1.61 times less risky than Electrameccanica. It trades about -0.17 of its potential returns per unit of risk. Electrameccanica Vehicles Corp is currently generating about -0.73 per unit of risk. If you would invest  2,762  in BYD Company Limited on January 20, 2024 and sell it today you would lose (161.00) from holding BYD Company Limited or give up 5.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.73%
Values	Daily Returns

BYD Company Limited  vs.  Electrameccanica Vehicles Corp

BYD Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Company Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, BYD Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Electrameccanica Veh

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrameccanica Vehicles Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with BYD Company and Electrameccanica

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

The idea behind BYD Company Limited and Electrameccanica Vehicles Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.