Correlation Between BorgWarner and Fuyao Glass
Can any of the company-specific risk be diversified away by investing in both BorgWarner 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 BorgWarner and Fuyao Glass into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BorgWarner and Fuyao Glass Industry, you can compare the effects of market volatilities on BorgWarner 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 BorgWarner with a short position of Fuyao Glass. Check out your portfolio center. Please also check ongoing floating volatility patterns of BorgWarner and Fuyao Glass.
Diversification Opportunities for BorgWarner and Fuyao Glass
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between BorgWarner and Fuyao is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding BorgWarner 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 BorgWarner 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 BorgWarner 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 BorgWarner i.e., BorgWarner and Fuyao Glass go up and down completely randomly.
Pair Corralation between BorgWarner and Fuyao Glass
Considering the 90-day investment horizon BorgWarner is expected to generate 10.19 times less return on investment than Fuyao Glass. But when comparing it to its historical volatility, BorgWarner is 2.54 times less risky than Fuyao Glass. It trades about 0.01 of its potential returns per unit of risk. Fuyao Glass Industry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 113.00 in Fuyao Glass Industry on August 26, 2024 and sell it today you would earn a total of 59.00 from holding Fuyao Glass Industry or generate 52.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BorgWarner vs. Fuyao Glass Industry
Performance |
| Timeline |
| BorgWarner |
| Fuyao Glass Industry |
BorgWarner and Fuyao Glass Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BorgWarner and Fuyao Glass
The main advantage of trading using opposite BorgWarner and Fuyao Glass positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner 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 BorgWarner 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.| Fuyao Glass vs. Allison Transmission Holdings | Fuyao Glass vs. Luminar Technologies | Fuyao Glass vs. Lear Corporation | Fuyao Glass vs. BorgWarner |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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