Correlation Between Fuwei Films and Myers Industries

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

Diversification Opportunities for Fuwei Films and Myers Industries

0.56

Correlation Coefficient

Fuwei Films  Myers Industries

Very weak diversification

The 3 months correlation between Fuwei and Myers is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fuwei Films Holdings and Myers Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Myers Industries 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 Myers Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Myers Industries has no effect on the direction of Fuwei Films i.e., Fuwei Films and Myers Industries go up and down completely randomly.

Pair Corralation between Fuwei Films and Myers Industries

Given the investment horizon of 90 days Fuwei Films Holdings is expected to generate 2.44 times more return on investment than Myers Industries. However, Fuwei Films is 2.44 times more volatile than Myers Industries. It trades about 0.09 of its potential returns per unit of risk. Myers Industries is currently generating about 0.01 per unit of risk. If you would invest  546.00  in Fuwei Films Holdings on January 25, 2024 and sell it today you would earn a total of  302.00  from holding Fuwei Films Holdings or generate 55.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	28.13%
Values	Daily Returns

Fuwei Films Holdings  vs.  Myers Industries

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.

Myers Industries

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Myers Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Myers Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuwei Films and Myers Industries

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

The idea behind Fuwei Films Holdings and Myers Industries 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.