Correlation Between Formula Systems and Fujitsu

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

By analyzing existing cross correlation between Formula Systems 1985 and Fujitsu Ltd ADR, you can compare the effects of market volatilities on Formula Systems and Fujitsu 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 Formula Systems with a short position of Fujitsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Fujitsu.

Diversification Opportunities for Formula Systems and Fujitsu

-0.63

Correlation Coefficient

Formula Systems  Fujitsu

Excellent diversification

The 3 months correlation between Formula and Fujitsu is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Fujitsu Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujitsu Ltd ADR and Formula Systems 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 Formula Systems 1985 are associated (or correlated) with Fujitsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujitsu Ltd ADR has no effect on the direction of Formula Systems i.e., Formula Systems and Fujitsu go up and down completely randomly.

Pair Corralation between Formula Systems and Fujitsu

Assuming the 90 days horizon Formula Systems 1985 is expected to generate 1.46 times more return on investment than Fujitsu. However, Formula Systems is 1.46 times more volatile than Fujitsu Ltd ADR. It trades about 0.14 of its potential returns per unit of risk. Fujitsu Ltd ADR is currently generating about -0.07 per unit of risk. If you would invest  7,633  in Formula Systems 1985 on September 16, 2024 and sell it today you would earn a total of  2,017  from holding Formula Systems 1985 or generate 26.42% return on investment over 90 days.

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

Formula Systems 1985  vs.  Fujitsu Ltd ADR

Formula Systems 1985

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Formula Systems 1985 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Formula Systems showed solid returns over the last few months and may actually be approaching a breakup point.

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 latest fragile 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 Formula Systems and Fujitsu

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

The idea behind Formula Systems 1985 and Fujitsu Ltd ADR 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.