Correlation Between Ricoh and Secom Co

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

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

Diversification Opportunities for Ricoh and Secom Co

-0.37

Correlation Coefficient

Ricoh  Secom Co

Very good diversification

The 3 months correlation between Ricoh and Secom is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ricoh Company and Secom Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secom Co and Ricoh 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 Ricoh Company are associated (or correlated) with Secom Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secom Co has no effect on the direction of Ricoh i.e., Ricoh and Secom Co go up and down completely randomly.

Pair Corralation between Ricoh and Secom Co

Assuming the 90 days horizon Ricoh Company is expected to generate 4.55 times more return on investment than Secom Co. However, Ricoh is 4.55 times more volatile than Secom Co Ltd. It trades about 0.11 of its potential returns per unit of risk. Secom Co Ltd is currently generating about 0.13 per unit of risk. If you would invest  1,100  in Ricoh Company on September 18, 2024 and sell it today you would earn a total of  103.00  from holding Ricoh Company or generate 9.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ricoh Company  vs.  Secom Co Ltd

Ricoh Company

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ricoh Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ricoh showed solid returns over the last few months and may actually be approaching a breakup point.

Secom Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Secom Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential 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 Ricoh and Secom Co

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

The idea behind Ricoh Company and Secom Co Ltd 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.