Correlation Between Canon and JCDecaux

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

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

Diversification Opportunities for Canon and JCDecaux

-0.51

Correlation Coefficient

Canon  JCDecaux

Excellent diversification

The 3 months correlation between Canon and JCDecaux is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and JCDecaux SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JCDecaux SA and Canon 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 Canon Inc are associated (or correlated) with JCDecaux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JCDecaux SA has no effect on the direction of Canon i.e., Canon and JCDecaux go up and down completely randomly.

Pair Corralation between Canon and JCDecaux

Assuming the 90 days trading horizon Canon Inc is expected to under-perform the JCDecaux. But the stock apears to be less risky and, when comparing its historical volatility, Canon Inc is 1.03 times less risky than JCDecaux. The stock trades about -0.02 of its potential returns per unit of risk. The JCDecaux SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,441  in JCDecaux SA on September 24, 2024 and sell it today you would earn a total of  39.00  from holding JCDecaux SA or generate 2.71% return on investment over 90 days.

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

Canon Inc  vs.  JCDecaux SA

Canon Inc

Risk-Adjusted Performance

4 of 100

Insignificant

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

JCDecaux SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Canon and JCDecaux

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

The idea behind Canon Inc and JCDecaux SA 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 CEOs Directory module to screen CEOs from public companies around the world.