Correlation Between Fuyao Glass and Brembo SpA

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

Diversification Opportunities for Fuyao Glass and Brembo SpA

0.22

Correlation Coefficient

Fuyao Glass  Brembo SpA

Modest diversification

The 3 months correlation between Fuyao and Brembo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fuyao Glass Industry and Brembo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brembo SpA 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 Brembo SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brembo SpA has no effect on the direction of Fuyao Glass i.e., Fuyao Glass and Brembo SpA go up and down completely randomly.

Pair Corralation between Fuyao Glass and Brembo SpA

Assuming the 90 days horizon Fuyao Glass is expected to generate 2.57 times less return on investment than Brembo SpA. But when comparing it to its historical volatility, Fuyao Glass Industry is 8.58 times less risky than Brembo SpA. It trades about 0.09 of its potential returns per unit of risk. Brembo SpA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  901.00  in Brembo SpA on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Brembo SpA or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Fuyao Glass Industry  vs.  Brembo SpA

Fuyao Glass Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuyao Glass Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Fuyao Glass is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Brembo SpA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brembo SpA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Brembo SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fuyao Glass and Brembo SpA

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

The idea behind Fuyao Glass Industry and Brembo SpA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .