Correlation Between BYD Co and Faraday Future

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

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

Diversification Opportunities for BYD Co and Faraday Future

-0.72

Correlation Coefficient

BYD Co  Faraday Future

Pay attention - limited upside

The 3 months correlation between BYD and Faraday is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BYD Co Ltd and Faraday Future Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Future Intel and BYD Co 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 Co Ltd are associated (or correlated) with Faraday Future. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Future Intel has no effect on the direction of BYD Co i.e., BYD Co and Faraday Future go up and down completely randomly.

Pair Corralation between BYD Co and Faraday Future

Assuming the 90 days horizon BYD Co Ltd is expected to generate 0.2 times more return on investment than Faraday Future. However, BYD Co Ltd is 5.08 times less risky than Faraday Future. It trades about 0.2 of its potential returns per unit of risk. Faraday Future Intelligent is currently generating about -0.41 per unit of risk. If you would invest  5,179  in BYD Co Ltd on January 31, 2024 and sell it today you would earn a total of  356.00  from holding BYD Co Ltd or generate 6.87% return on investment over 90 days.

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

BYD Co Ltd  vs.  Faraday Future Intelligent

BYD Co

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Co Ltd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, BYD Co showed solid returns over the last few months and may actually be approaching a breakup point.

Faraday Future Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Future Intelligent 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 forward indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with BYD Co and Faraday Future

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

The idea behind BYD Co Ltd and Faraday Future Intelligent 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.