Correlation Between Fujitsu and Seiko Epson

Can any of the company-specific risk be diversified away by investing in both Fujitsu and Seiko Epson 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 Seiko Epson 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 Seiko Epson Corp, you can compare the effects of market volatilities on Fujitsu and Seiko Epson 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 Seiko Epson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fujitsu and Seiko Epson.

Diversification Opportunities for Fujitsu and Seiko Epson

0.62

Correlation Coefficient

Fujitsu  Seiko Epson

Poor diversification

The 3 months correlation between Fujitsu and Seiko is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fujitsu Ltd ADR and Seiko Epson Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seiko Epson Corp 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 Seiko Epson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seiko Epson Corp has no effect on the direction of Fujitsu i.e., Fujitsu and Seiko Epson go up and down completely randomly.

Pair Corralation between Fujitsu and Seiko Epson

Assuming the 90 days horizon Fujitsu Ltd ADR is expected to under-perform the Seiko Epson. In addition to that, Fujitsu is 1.15 times more volatile than Seiko Epson Corp. It trades about -0.15 of its total potential returns per unit of risk. Seiko Epson Corp is currently generating about -0.07 per unit of volatility. If you would invest  922.00  in Seiko Epson Corp on October 20, 2024 and sell it today you would lose (66.00) from holding Seiko Epson Corp or give up 7.16% of portfolio value over 90 days.

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

Fujitsu Ltd ADR  vs.  Seiko Epson Corp

Fujitsu Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujitsu Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Seiko Epson Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seiko Epson Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental 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 Seiko Epson

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

The idea behind Fujitsu Ltd ADR and Seiko Epson Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.