Correlation Between Waters and Fuyao Glass

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

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

Diversification Opportunities for Waters and Fuyao Glass

0.65

Correlation Coefficient

Waters  Fuyao Glass

Poor diversification

The 3 months correlation between Waters and Fuyao is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Waters 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 Waters 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 Waters 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 Waters i.e., Waters and Fuyao Glass go up and down completely randomly.

Pair Corralation between Waters and Fuyao Glass

Considering the 90-day investment horizon Waters is expected to generate 0.65 times more return on investment than Fuyao Glass. However, Waters is 1.55 times less risky than Fuyao Glass. It trades about 0.09 of its potential returns per unit of risk. Fuyao Glass Industry is currently generating about 0.06 per unit of risk. If you would invest  28,831  in Waters on October 8, 2024 and sell it today you would earn a total of  8,345  from holding Waters or generate 28.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.43%
Values	Daily Returns

Waters  vs.  Fuyao Glass Industry

Waters

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 unsteady 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 Waters and Fuyao Glass

The main advantage of trading using opposite Waters and Fuyao Glass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters 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 Waters 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.