Correlation Between Fujitsu and Ricoh Company

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

By analyzing existing cross correlation between Fujitsu Ltd ADR and Ricoh Company, you can compare the effects of market volatilities on Fujitsu and Ricoh Company 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 Fujitsu with a short position of Ricoh Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujitsu and Ricoh Company.

Diversification Opportunities for Fujitsu and Ricoh Company

-0.66

Correlation Coefficient

Fujitsu  Ricoh Company

Excellent diversification

The 3 months correlation between Fujitsu and Ricoh is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fujitsu Ltd ADR and Ricoh Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ricoh Company and Fujitsu 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 Fujitsu Ltd ADR are associated (or correlated) with Ricoh Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ricoh Company has no effect on the direction of Fujitsu i.e., Fujitsu and Ricoh Company go up and down completely randomly.

Pair Corralation between Fujitsu and Ricoh Company

Assuming the 90 days horizon Fujitsu Ltd ADR is expected to generate 0.8 times more return on investment than Ricoh Company. However, Fujitsu Ltd ADR is 1.25 times less risky than Ricoh Company. It trades about 0.14 of its potential returns per unit of risk. Ricoh Company is currently generating about -0.04 per unit of risk. If you would invest  1,761  in Fujitsu Ltd ADR on December 28, 2024 and sell it today you would earn a total of  305.00  from holding Fujitsu Ltd ADR or generate 17.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

Fujitsu Ltd ADR  vs.  Ricoh Company

Fujitsu Ltd ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fujitsu Ltd ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Fujitsu showed solid returns over the last few months and may actually be approaching a breakup point.

Ricoh Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ricoh Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fujitsu and Ricoh Company

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

The idea behind Fujitsu Ltd ADR and Ricoh Company 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.