Correlation Between Fuwei Films and Graphic Packaging

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

By analyzing existing cross correlation between Fuwei Films Holdings and Graphic Packaging Holding, you can compare the effects of market volatilities on Fuwei Films and Graphic Packaging 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 Fuwei Films with a short position of Graphic Packaging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fuwei Films and Graphic Packaging.

Diversification Opportunities for Fuwei Films and Graphic Packaging

0.54

Correlation Coefficient

Fuwei Films  Graphic Packaging

Very weak diversification

The 3 months correlation between Fuwei and Graphic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fuwei Films Holdings and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding and Fuwei Films 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 Fuwei Films Holdings are associated (or correlated) with Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Fuwei Films i.e., Fuwei Films and Graphic Packaging go up and down completely randomly.

Pair Corralation between Fuwei Films and Graphic Packaging

If you would invest  848.00  in Fuwei Films Holdings on January 26, 2024 and sell it today you would earn a total of  0.00  from holding Fuwei Films Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Fuwei Films Holdings  vs.  Graphic Packaging Holding

Fuwei Films Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuwei Films Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Fuwei Films is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Graphic Packaging Holding

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Graphic Packaging Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Graphic Packaging may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Fuwei Films and Graphic Packaging

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

The idea behind Fuwei Films Holdings and Graphic Packaging Holding 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 Global Correlations module to find global opportunities by holding instruments from different markets.