Correlation Between Fuyao Glass and BG Foods

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

Diversification Opportunities for Fuyao Glass and BG Foods

0.26

Correlation Coefficient

Fuyao Glass  BG Foods

Modest diversification

The 3 months correlation between Fuyao and DHR is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fuyao Glass Industry and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Fuyao Glass i.e., Fuyao Glass and BG Foods go up and down completely randomly.

Pair Corralation between Fuyao Glass and BG Foods

Assuming the 90 days horizon Fuyao Glass Industry is expected to generate 1.19 times more return on investment than BG Foods. However, Fuyao Glass is 1.19 times more volatile than BG Foods. It trades about 0.08 of its potential returns per unit of risk. BG Foods is currently generating about -0.02 per unit of risk. If you would invest  187.00  in Fuyao Glass Industry on October 4, 2024 and sell it today you would earn a total of  468.00  from holding Fuyao Glass Industry or generate 250.27% 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.  BG Foods

Fuyao Glass Industry

Risk-Adjusted Performance

3 of 100

Insignificant

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

BG Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Fuyao Glass and BG Foods

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

The idea behind Fuyao Glass Industry and BG Foods 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.