Correlation Between BYD ELECTRONIC and PENN NATL

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

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

Diversification Opportunities for BYD ELECTRONIC and PENN NATL

0.2

Correlation Coefficient

BYD ELECTRONIC  PENN NATL

Modest diversification

The 3 months correlation between BYD and PENN is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BYD ELECTRONIC and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING and BYD ELECTRONIC 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 ELECTRONIC are associated (or correlated) with PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of BYD ELECTRONIC i.e., BYD ELECTRONIC and PENN NATL go up and down completely randomly.

Pair Corralation between BYD ELECTRONIC and PENN NATL

Assuming the 90 days trading horizon BYD ELECTRONIC is expected to generate 1.32 times more return on investment than PENN NATL. However, BYD ELECTRONIC is 1.32 times more volatile than PENN NATL GAMING. It trades about 0.05 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.2 per unit of risk. If you would invest  317.00  in BYD ELECTRONIC on February 6, 2024 and sell it today you would earn a total of  9.00  from holding BYD ELECTRONIC or generate 2.84% return on investment over 90 days.

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

BYD ELECTRONIC  vs.  PENN NATL GAMING

BYD ELECTRONIC

Risk-Adjusted Performance

0 of 100

Very Weak

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

PENN NATL GAMING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PENN NATL GAMING 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 basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with BYD ELECTRONIC and PENN NATL

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

The idea behind BYD ELECTRONIC and PENN NATL GAMING 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .