Correlation Between Fuyao Glass and Dana

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

By analyzing existing cross correlation between Fuyao Glass Industry and Dana Inc, you can compare the effects of market volatilities on Fuyao Glass and Dana 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 Fuyao Glass with a short position of Dana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuyao Glass and Dana.

Diversification Opportunities for Fuyao Glass and Dana

0.03

Correlation Coefficient

Fuyao Glass  Dana

Significant diversification

The 3 months correlation between Fuyao and Dana is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fuyao Glass Industry and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Inc and Fuyao Glass 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 Fuyao Glass Industry are associated (or correlated) with Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of Fuyao Glass i.e., Fuyao Glass and Dana go up and down completely randomly.

Pair Corralation between Fuyao Glass and Dana

Assuming the 90 days horizon Fuyao Glass is expected to generate 57.24 times less return on investment than Dana. But when comparing it to its historical volatility, Fuyao Glass Industry is 1.82 times less risky than Dana. It trades about 0.01 of its potential returns per unit of risk. Dana Inc is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,240  in Dana Inc on November 19, 2024 and sell it today you would earn a total of  280.00  from holding Dana Inc or generate 22.58% return on investment over 90 days.

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

Fuyao Glass Industry  vs.  Dana Inc

Fuyao Glass Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fuyao Glass Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fuyao Glass is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dana Inc

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dana reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuyao Glass and Dana

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

The idea behind Fuyao Glass Industry and Dana Inc 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.