Correlation Between FUJIFILM Holdings and Hitachi

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

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

Diversification Opportunities for FUJIFILM Holdings and Hitachi

0.64

Correlation Coefficient

FUJIFILM Holdings  Hitachi

Poor diversification

The 3 months correlation between FUJIFILM and Hitachi is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding FUJIFILM Holdings Corp and Hitachi Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Ltd ADR and FUJIFILM Holdings 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 FUJIFILM Holdings Corp are associated (or correlated) with Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Ltd ADR has no effect on the direction of FUJIFILM Holdings i.e., FUJIFILM Holdings and Hitachi go up and down completely randomly.

Pair Corralation between FUJIFILM Holdings and Hitachi

Assuming the 90 days horizon FUJIFILM Holdings is expected to generate 1.73 times less return on investment than Hitachi. But when comparing it to its historical volatility, FUJIFILM Holdings Corp is 1.14 times less risky than Hitachi. It trades about 0.09 of its potential returns per unit of risk. Hitachi Ltd ADR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,698  in Hitachi Ltd ADR on February 3, 2024 and sell it today you would earn a total of  9,938  from holding Hitachi Ltd ADR or generate 114.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.05%
Values	Daily Returns

FUJIFILM Holdings Corp  vs.  Hitachi Ltd ADR

FUJIFILM Holdings Corp

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days FUJIFILM Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak forward indicators, FUJIFILM Holdings may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Hitachi Ltd ADR

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Ltd ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Hitachi showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FUJIFILM Holdings and Hitachi

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

The idea behind FUJIFILM Holdings Corp and Hitachi 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.