Correlation Between Brother Industries and Canon

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

By analyzing existing cross correlation between Brother Industries and Canon Inc, you can compare the effects of market volatilities on Brother Industries and Canon 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 Brother Industries with a short position of Canon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brother Industries and Canon.

Diversification Opportunities for Brother Industries and Canon

-0.1

Correlation Coefficient

Brother Industries  Canon

Good diversification

The 3 months correlation between Brother and Canon is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Brother Industries and Canon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canon Inc and Brother Industries 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 Brother Industries are associated (or correlated) with Canon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canon Inc has no effect on the direction of Brother Industries i.e., Brother Industries and Canon go up and down completely randomly.

Pair Corralation between Brother Industries and Canon

Assuming the 90 days horizon Brother Industries is expected to under-perform the Canon. In addition to that, Brother Industries is 1.12 times more volatile than Canon Inc. It trades about -0.01 of its total potential returns per unit of risk. Canon Inc is currently generating about 0.07 per unit of volatility. If you would invest  2,988  in Canon Inc on September 15, 2024 and sell it today you would earn a total of  192.00  from holding Canon Inc or generate 6.43% return on investment over 90 days.

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

Brother Industries  vs.  Canon Inc

Brother Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brother Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brother Industries is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Canon Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Canon Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Canon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brother Industries and Canon

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

The idea behind Brother Industries and Canon Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.