Correlation Between Secom Co and Fujitsu

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

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

Diversification Opportunities for Secom Co and Fujitsu

0.69

Correlation Coefficient

Secom Co  Fujitsu

Poor diversification

The 3 months correlation between Secom and Fujitsu is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Secom Co Ltd 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 Secom Co 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 Secom Co Ltd 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 Secom Co i.e., Secom Co and Fujitsu go up and down completely randomly.

Pair Corralation between Secom Co and Fujitsu

Assuming the 90 days horizon Secom Co Ltd is expected to under-perform the Fujitsu. But the pink sheet apears to be less risky and, when comparing its historical volatility, Secom Co Ltd is 1.47 times less risky than Fujitsu. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Fujitsu Ltd ADR is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,038  in Fujitsu Ltd ADR on September 18, 2024 and sell it today you would lose (217.00) from holding Fujitsu Ltd ADR or give up 10.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Secom Co Ltd  vs.  Fujitsu Ltd ADR

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.

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. In spite of latest fragile performance, the Stock's basic 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 Secom Co and Fujitsu

The main advantage of trading using opposite Secom Co and Fujitsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Secom Co 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 Secom Co Ltd 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.