Correlation Between Fuji Electric and RF Industries

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

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

Diversification Opportunities for Fuji Electric and RF Industries

-0.17

Correlation Coefficient

Fuji Electric  RF Industries

Good diversification

The 3 months correlation between Fuji and RFIL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fuji Electric Co and RF Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Industries and Fuji Electric 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 Fuji Electric Co are associated (or correlated) with RF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Industries has no effect on the direction of Fuji Electric i.e., Fuji Electric and RF Industries go up and down completely randomly.

Pair Corralation between Fuji Electric and RF Industries

Assuming the 90 days horizon Fuji Electric Co is expected to generate 0.92 times more return on investment than RF Industries. However, Fuji Electric Co is 1.09 times less risky than RF Industries. It trades about 0.05 of its potential returns per unit of risk. RF Industries is currently generating about 0.02 per unit of risk. If you would invest  1,076  in Fuji Electric Co on September 12, 2024 and sell it today you would earn a total of  372.00  from holding Fuji Electric Co or generate 34.57% return on investment over 90 days.

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

Fuji Electric Co  vs.  RF Industries

Fuji Electric

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fuji Electric Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fuji Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

RF Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RF Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward indicators, RF Industries disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuji Electric and RF Industries

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

The idea behind Fuji Electric Co and RF Industries 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.