Correlation Between Wipro Limited and Fujitsu

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

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

Diversification Opportunities for Wipro Limited and Fujitsu

-0.39

Correlation Coefficient

Wipro Limited  Fujitsu

Very good diversification

The 3 months correlation between Wipro and Fujitsu is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited ADR and Fujitsu Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujitsu Limited and Wipro Limited 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 Wipro Limited ADR 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 Limited has no effect on the direction of Wipro Limited i.e., Wipro Limited and Fujitsu go up and down completely randomly.

Pair Corralation between Wipro Limited and Fujitsu

Considering the 90-day investment horizon Wipro Limited ADR is expected to generate 1.12 times more return on investment than Fujitsu. However, Wipro Limited is 1.12 times more volatile than Fujitsu Limited. It trades about 0.04 of its potential returns per unit of risk. Fujitsu Limited is currently generating about 0.03 per unit of risk. If you would invest  242.00  in Wipro Limited ADR on October 7, 2024 and sell it today you would earn a total of  108.00  from holding Wipro Limited ADR or generate 44.63% return on investment over 90 days.

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

Wipro Limited ADR  vs.  Fujitsu Limited

Wipro Limited ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Wipro Limited unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fujitsu Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujitsu Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Wipro Limited and Fujitsu

The main advantage of trading using opposite Wipro Limited and Fujitsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro Limited 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 Wipro Limited ADR and Fujitsu Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.