Correlation Between Bank of America and Fujitsu

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

By analyzing existing cross correlation between Bank of America and Fujitsu Ltd ADR, you can compare the effects of market volatilities on Bank of America and Fujitsu 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 Bank of America with a short position of Fujitsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Fujitsu.

Diversification Opportunities for Bank of America and Fujitsu

-0.79

Correlation Coefficient

Bank of America  Fujitsu

Pay attention - limited upside

The 3 months correlation between Bank and Fujitsu is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Fujitsu Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujitsu Ltd ADR and Bank of America 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 Bank of America are associated (or correlated) with Fujitsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujitsu Ltd ADR has no effect on the direction of Bank of America i.e., Bank of America and Fujitsu go up and down completely randomly.

Pair Corralation between Bank of America and Fujitsu

Considering the 90-day investment horizon Bank of America is expected to under-perform the Fujitsu. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.66 times less risky than Fujitsu. The stock trades about -0.1 of its potential returns per unit of risk. The Fujitsu Ltd ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,803  in Fujitsu Ltd ADR on September 16, 2024 and sell it today you would earn a total of  49.00  from holding Fujitsu Ltd ADR or generate 2.72% return on investment over 90 days.

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

Bank of America  vs.  Fujitsu Ltd ADR

Bank of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fujitsu Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujitsu Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank of America and Fujitsu

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

The idea behind Bank of America and Fujitsu Ltd ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.