Correlation Between Obayashi and Fuyao Glass

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

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

Diversification Opportunities for Obayashi and Fuyao Glass

0.74

Correlation Coefficient

Obayashi  Fuyao Glass

Poor diversification

The 3 months correlation between Obayashi and Fuyao is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi 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 Obayashi 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 Obayashi 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 Obayashi i.e., Obayashi and Fuyao Glass go up and down completely randomly.

Pair Corralation between Obayashi and Fuyao Glass

Assuming the 90 days horizon Obayashi is expected to under-perform the Fuyao Glass. In addition to that, Obayashi is 1.97 times more volatile than Fuyao Glass Industry. It trades about -0.21 of its total potential returns per unit of risk. Fuyao Glass Industry is currently generating about -0.21 per unit of volatility. If you would invest  172.00  in Fuyao Glass Industry on October 4, 2024 and sell it today you would lose (5.00) from holding Fuyao Glass Industry or give up 2.91% of portfolio value over 90 days.

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

Obayashi  vs.  Fuyao Glass Industry

Obayashi

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Obayashi are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Obayashi 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

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 weak technical and fundamental indicators, Fuyao Glass showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Obayashi and Fuyao Glass

The main advantage of trading using opposite Obayashi and Fuyao Glass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi 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 Obayashi 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.