Correlation Between Canon and United Overseas

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Can any of the company-specific risk be diversified away by investing in both Canon and United Overseas 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 United Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canon Inc and United Overseas Bank, you can compare the effects of market volatilities on Canon and United Overseas 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 United Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canon and United Overseas.

Diversification Opportunities for Canon and United Overseas

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Canon and United is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Canon Inc and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank 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 United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of Canon i.e., Canon and United Overseas go up and down completely randomly.

Pair Corralation between Canon and United Overseas

Assuming the 90 days trading horizon Canon Inc is expected to generate 1.6 times more return on investment than United Overseas. However, Canon is 1.6 times more volatile than United Overseas Bank. It trades about 0.06 of its potential returns per unit of risk. United Overseas Bank is currently generating about 0.06 per unit of risk. If you would invest  1,844  in Canon Inc on September 23, 2024 and sell it today you would earn a total of  1,236  from holding Canon Inc or generate 67.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Canon Inc  vs.  United Overseas Bank

 Performance 
       Timeline  
Canon Inc 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
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.
United Overseas Bank 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Canon and United Overseas Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Canon and United Overseas

The main advantage of trading using opposite Canon and United Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canon position performs unexpectedly, United Overseas 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 United Overseas will offset losses from the drop in United Overseas' long position.
The idea behind Canon Inc and United Overseas Bank 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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