Correlation Between International Business and FUJITSU

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

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

Diversification Opportunities for International Business and FUJITSU

0.19

Correlation Coefficient

International Business  FUJITSU

Average diversification

The 3 months correlation between International and FUJITSU is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine 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 International Business 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 International Business Machines 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 International Business i.e., International Business and FUJITSU go up and down completely randomly.

Pair Corralation between International Business and FUJITSU

Assuming the 90 days trading horizon International Business is expected to generate 1.17 times less return on investment than FUJITSU. But when comparing it to its historical volatility, International Business Machines is 1.37 times less risky than FUJITSU. It trades about 0.1 of its potential returns per unit of risk. FUJITSU LTD ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,680  in FUJITSU LTD ADR on September 23, 2024 and sell it today you would earn a total of  40.00  from holding FUJITSU LTD ADR or generate 2.38% return on investment over 90 days.

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

International Business Machine  vs.  FUJITSU LTD ADR

International Business

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, International Business may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. Despite nearly stable forward-looking indicators, FUJITSU is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Business and FUJITSU

The main advantage of trading using opposite International Business and FUJITSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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 International Business Machines 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.