Correlation Between Canon and Nippon Telegraph

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

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

Diversification Opportunities for Canon and Nippon Telegraph

0.5

Correlation Coefficient

Canon  Nippon Telegraph

Very weak diversification

The 3 months correlation between Canon and Nippon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and Nippon Telegraph and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph 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 Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph has no effect on the direction of Canon i.e., Canon and Nippon Telegraph go up and down completely randomly.

Pair Corralation between Canon and Nippon Telegraph

Assuming the 90 days trading horizon Canon is expected to generate 5.3 times less return on investment than Nippon Telegraph. In addition to that, Canon is 1.12 times more volatile than Nippon Telegraph and. It trades about 0.01 of its total potential returns per unit of risk. Nippon Telegraph and is currently generating about 0.07 per unit of volatility. If you would invest  89.00  in Nippon Telegraph and on October 22, 2024 and sell it today you would earn a total of  5.00  from holding Nippon Telegraph and or generate 5.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Canon Inc  vs.  Nippon Telegraph and

Canon Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Canon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Nippon Telegraph

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Canon and Nippon Telegraph

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

The idea behind Canon Inc and Nippon Telegraph and 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.