Correlation Between Secom Co and Mitsui Fudosan

Can any of the company-specific risk be diversified away by investing in both Secom Co and Mitsui Fudosan 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 Mitsui Fudosan 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 Mitsui Fudosan Co, you can compare the effects of market volatilities on Secom Co and Mitsui Fudosan 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 Mitsui Fudosan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Secom Co and Mitsui Fudosan.

Diversification Opportunities for Secom Co and Mitsui Fudosan

0.8

Correlation Coefficient

Secom Co  Mitsui Fudosan

Very poor diversification

The 3 months correlation between Secom and Mitsui is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Secom Co Ltd and Mitsui Fudosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Fudosan 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 Mitsui Fudosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Fudosan has no effect on the direction of Secom Co i.e., Secom Co and Mitsui Fudosan go up and down completely randomly.

Pair Corralation between Secom Co and Mitsui Fudosan

Assuming the 90 days horizon Secom Co Ltd is expected to generate 0.66 times more return on investment than Mitsui Fudosan. However, Secom Co Ltd is 1.51 times less risky than Mitsui Fudosan. It trades about -0.21 of its potential returns per unit of risk. Mitsui Fudosan Co is currently generating about -0.16 per unit of risk. If you would invest  872.00  in Secom Co Ltd on October 6, 2024 and sell it today you would lose (30.00) from holding Secom Co Ltd or give up 3.44% of portfolio value over 90 days.

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

Secom Co Ltd  vs.  Mitsui Fudosan Co

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 fairly strong essential indicators, Secom Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mitsui Fudosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Fudosan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Secom Co and Mitsui Fudosan

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

The idea behind Secom Co Ltd and Mitsui Fudosan Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.