Correlation Between Fuyao Glass and Continental Aktiengesellscha

Can any of the company-specific risk be diversified away by investing in both Fuyao Glass and Continental Aktiengesellscha 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 Continental Aktiengesellscha 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 Continental Aktiengesellschaft, you can compare the effects of market volatilities on Fuyao Glass and Continental Aktiengesellscha 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 Continental Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuyao Glass and Continental Aktiengesellscha.

Diversification Opportunities for Fuyao Glass and Continental Aktiengesellscha

0.34

Correlation Coefficient

Fuyao Glass  Continental Aktiengesellscha

Weak diversification

The 3 months correlation between Fuyao and Continental is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fuyao Glass Industry and Continental Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Aktiengesellscha 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 Continental Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Aktiengesellscha has no effect on the direction of Fuyao Glass i.e., Fuyao Glass and Continental Aktiengesellscha go up and down completely randomly.

Pair Corralation between Fuyao Glass and Continental Aktiengesellscha

Assuming the 90 days horizon Fuyao Glass Industry is expected to under-perform the Continental Aktiengesellscha. But the stock apears to be less risky and, when comparing its historical volatility, Fuyao Glass Industry is 1.65 times less risky than Continental Aktiengesellscha. The stock trades about -0.05 of its potential returns per unit of risk. The Continental Aktiengesellschaft is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,000  in Continental Aktiengesellschaft on September 23, 2024 and sell it today you would earn a total of  500.00  from holding Continental Aktiengesellschaft or generate 8.33% return on investment over 90 days.

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

Fuyao Glass Industry  vs.  Continental Aktiengesellschaft

Fuyao Glass Industry

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuyao Glass Industry are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fuyao Glass reported solid returns over the last few months and may actually be approaching a breakup point.

Continental Aktiengesellscha

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Continental Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuyao Glass and Continental Aktiengesellscha

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

The idea behind Fuyao Glass Industry and Continental Aktiengesellschaft 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.