Correlation Between Canon and Dentsu

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

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

Diversification Opportunities for Canon and Dentsu

-0.39

Correlation Coefficient

Canon  Dentsu

Very good diversification

The 3 months correlation between Canon and Dentsu is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and Dentsu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dentsu Group 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 Dentsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dentsu Group has no effect on the direction of Canon i.e., Canon and Dentsu go up and down completely randomly.

Pair Corralation between Canon and Dentsu

Assuming the 90 days trading horizon Canon Inc is expected to generate 0.92 times more return on investment than Dentsu. However, Canon Inc is 1.08 times less risky than Dentsu. It trades about 0.05 of its potential returns per unit of risk. Dentsu Group is currently generating about -0.01 per unit of risk. If you would invest  2,055  in Canon Inc on September 24, 2024 and sell it today you would earn a total of  1,074  from holding Canon Inc or generate 52.26% return on investment over 90 days.

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

Canon Inc  vs.  Dentsu Group

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.

Dentsu Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dentsu Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canon and Dentsu

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

The idea behind Canon Inc and Dentsu Group 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.