Correlation Between Seiko Epson and Fujitsu

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

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

Diversification Opportunities for Seiko Epson and Fujitsu

-0.51

Correlation Coefficient

Seiko Epson  Fujitsu

Excellent diversification

The 3 months correlation between Seiko and Fujitsu is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Seiko Epson Corp 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 Seiko Epson 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 Seiko Epson Corp 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 Seiko Epson i.e., Seiko Epson and Fujitsu go up and down completely randomly.

Pair Corralation between Seiko Epson and Fujitsu

Assuming the 90 days horizon Seiko Epson Corp is expected to under-perform the Fujitsu. But the pink sheet apears to be less risky and, when comparing its historical volatility, Seiko Epson Corp is 1.09 times less risky than Fujitsu. The pink sheet trades about -0.09 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  1,843  in Fujitsu Ltd ADR on December 10, 2024 and sell it today you would earn a total of  180.00  from holding Fujitsu Ltd ADR or generate 9.77% return on investment over 90 days.

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

Seiko Epson Corp  vs.  Fujitsu Ltd ADR

Seiko Epson Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Seiko Epson Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fujitsu Ltd ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fujitsu Ltd ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Fujitsu may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Seiko Epson and Fujitsu

The main advantage of trading using opposite Seiko Epson and Fujitsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seiko Epson 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 Seiko Epson Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.