Correlation Between Highlight Communications and Casio Computer

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

By analyzing existing cross correlation between Highlight Communications AG and Casio Computer CoLtd, you can compare the effects of market volatilities on Highlight Communications and Casio Computer 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 Highlight Communications with a short position of Casio Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Casio Computer.

Diversification Opportunities for Highlight Communications and Casio Computer

0.54

Correlation Coefficient

Highlight Communications  Casio Computer

Very weak diversification

The 3 months correlation between Highlight and Casio is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Casio Computer CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer CoLtd and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer CoLtd has no effect on the direction of Highlight Communications i.e., Highlight Communications and Casio Computer go up and down completely randomly.

Pair Corralation between Highlight Communications and Casio Computer

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 2.69 times more return on investment than Casio Computer. However, Highlight Communications is 2.69 times more volatile than Casio Computer CoLtd. It trades about 0.26 of its potential returns per unit of risk. Casio Computer CoLtd is currently generating about 0.26 per unit of risk. If you would invest  92.00  in Highlight Communications AG on October 6, 2024 and sell it today you would earn a total of  50.00  from holding Highlight Communications AG or generate 54.35% return on investment over 90 days.

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

Highlight Communications AG  vs.  Casio Computer CoLtd

Highlight Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Highlight Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Casio Computer CoLtd

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer CoLtd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Casio Computer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Highlight Communications and Casio Computer

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

The idea behind Highlight Communications AG and Casio Computer CoLtd 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.