Correlation Between Hitachi and FUJIFILM Holdings

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

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

Diversification Opportunities for Hitachi and FUJIFILM Holdings

0.34

Correlation Coefficient

Hitachi  FUJIFILM Holdings

Weak diversification

The 3 months correlation between Hitachi and FUJIFILM is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR and FUJIFILM Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJIFILM Holdings and Hitachi 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 Hitachi Ltd ADR are associated (or correlated) with FUJIFILM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJIFILM Holdings has no effect on the direction of Hitachi i.e., Hitachi and FUJIFILM Holdings go up and down completely randomly.

Pair Corralation between Hitachi and FUJIFILM Holdings

Assuming the 90 days horizon Hitachi Ltd ADR is expected to generate 0.86 times more return on investment than FUJIFILM Holdings. However, Hitachi Ltd ADR is 1.16 times less risky than FUJIFILM Holdings. It trades about 0.12 of its potential returns per unit of risk. FUJIFILM Holdings is currently generating about 0.06 per unit of risk. If you would invest  2,326  in Hitachi Ltd ADR on September 19, 2024 and sell it today you would earn a total of  2,695  from holding Hitachi Ltd ADR or generate 115.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.83%
Values	Daily Returns

Hitachi Ltd ADR  vs.  FUJIFILM Holdings

Hitachi Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hitachi Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Hitachi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FUJIFILM Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FUJIFILM Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, FUJIFILM Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hitachi and FUJIFILM Holdings

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

The idea behind Hitachi Ltd ADR and FUJIFILM Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.