Correlation Between Big 5 and Fukuyama Transporting

Can any of the company-specific risk be diversified away by investing in both Big 5 and Fukuyama Transporting 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 Big 5 and Fukuyama Transporting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and Fukuyama Transporting Co, you can compare the effects of market volatilities on Big 5 and Fukuyama Transporting 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 Big 5 with a short position of Fukuyama Transporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and Fukuyama Transporting.

Diversification Opportunities for Big 5 and Fukuyama Transporting

-0.6

Correlation Coefficient

Big 5  Fukuyama Transporting

Excellent diversification

The 3 months correlation between Big and Fukuyama is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and Fukuyama Transporting Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fukuyama Transporting and Big 5 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 Big 5 Sporting are associated (or correlated) with Fukuyama Transporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fukuyama Transporting has no effect on the direction of Big 5 i.e., Big 5 and Fukuyama Transporting go up and down completely randomly.

Pair Corralation between Big 5 and Fukuyama Transporting

Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the Fukuyama Transporting. In addition to that, Big 5 is 2.9 times more volatile than Fukuyama Transporting Co. It trades about -0.26 of its total potential returns per unit of risk. Fukuyama Transporting Co is currently generating about 0.06 per unit of volatility. If you would invest  2,179  in Fukuyama Transporting Co on December 29, 2024 and sell it today you would earn a total of  99.00  from holding Fukuyama Transporting Co or generate 4.54% return on investment over 90 days.

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

Big 5 Sporting  vs.  Fukuyama Transporting Co

Big 5 Sporting

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fukuyama Transporting

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fukuyama Transporting Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fukuyama Transporting is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Big 5 and Fukuyama Transporting

The main advantage of trading using opposite Big 5 and Fukuyama Transporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, Fukuyama Transporting 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 Fukuyama Transporting will offset losses from the drop in Fukuyama Transporting's long position.

The idea behind Big 5 Sporting and Fukuyama Transporting Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.