Correlation Between Fast Retailing and FUJITSU

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

By analyzing existing cross correlation between Fast Retailing Co and FUJITSU LTD ADR, you can compare the effects of market volatilities on Fast Retailing 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 Fast Retailing with a short position of FUJITSU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and FUJITSU.

Diversification Opportunities for Fast Retailing and FUJITSU

-0.16

Correlation Coefficient

Fast Retailing  FUJITSU

Good diversification

The 3 months correlation between Fast and FUJITSU is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co 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 Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and FUJITSU go up and down completely randomly.

Pair Corralation between Fast Retailing and FUJITSU

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the FUJITSU. But the stock apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.02 times less risky than FUJITSU. The stock trades about -0.14 of its potential returns per unit of risk. The FUJITSU LTD ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,720  in FUJITSU LTD ADR on December 20, 2024 and sell it today you would earn a total of  150.00  from holding FUJITSU LTD ADR or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Fast Retailing Co  vs.  FUJITSU LTD ADR

Fast Retailing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

FUJITSU LTD ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FUJITSU LTD ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, FUJITSU may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fast Retailing and FUJITSU

The main advantage of trading using opposite Fast Retailing and FUJITSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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 Fast Retailing Co 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.