Correlation Between Arbor Metals and Fuyao Glass

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Can any of the company-specific risk be diversified away by investing in both Arbor Metals and Fuyao Glass 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 Arbor Metals and Fuyao Glass into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arbor Metals Corp and Fuyao Glass Industry, you can compare the effects of market volatilities on Arbor Metals and Fuyao Glass 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 Arbor Metals with a short position of Fuyao Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Metals and Fuyao Glass.

Diversification Opportunities for Arbor Metals and Fuyao Glass

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Arbor and Fuyao is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Metals Corp and Fuyao Glass Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuyao Glass Industry and Arbor Metals 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 Arbor Metals Corp are associated (or correlated) with Fuyao Glass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuyao Glass Industry has no effect on the direction of Arbor Metals i.e., Arbor Metals and Fuyao Glass go up and down completely randomly.

Pair Corralation between Arbor Metals and Fuyao Glass

Assuming the 90 days horizon Arbor Metals Corp is expected to generate 43.16 times more return on investment than Fuyao Glass. However, Arbor Metals is 43.16 times more volatile than Fuyao Glass Industry. It trades about 0.13 of its potential returns per unit of risk. Fuyao Glass Industry is currently generating about 0.14 per unit of risk. If you would invest  5.00  in Arbor Metals Corp on October 21, 2024 and sell it today you would lose (1.40) from holding Arbor Metals Corp or give up 28.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Arbor Metals Corp  vs.  Fuyao Glass Industry

 Performance 
       Timeline  
Arbor Metals Corp 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Metals Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Arbor Metals reported solid returns over the last few months and may actually be approaching a breakup point.
Fuyao Glass Industry 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Fuyao Glass Industry are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Fuyao Glass showed solid returns over the last few months and may actually be approaching a breakup point.

Arbor Metals and Fuyao Glass Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arbor Metals and Fuyao Glass

The main advantage of trading using opposite Arbor Metals and Fuyao Glass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Metals position performs unexpectedly, Fuyao Glass 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 Fuyao Glass will offset losses from the drop in Fuyao Glass' long position.
The idea behind Arbor Metals Corp and Fuyao Glass Industry 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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