Correlation Between Fuji Media and Dolby Laboratories

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

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

Diversification Opportunities for Fuji Media and Dolby Laboratories

-0.35

Correlation Coefficient

Fuji Media  Dolby Laboratories

Very good diversification

The 3 months correlation between Fuji and Dolby is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fuji Media Holdings and Dolby Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dolby Laboratories and Fuji Media 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 Media Holdings are associated (or correlated) with Dolby Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dolby Laboratories has no effect on the direction of Fuji Media i.e., Fuji Media and Dolby Laboratories go up and down completely randomly.

Pair Corralation between Fuji Media and Dolby Laboratories

Assuming the 90 days horizon Fuji Media is expected to generate 9.6 times less return on investment than Dolby Laboratories. But when comparing it to its historical volatility, Fuji Media Holdings is 1.39 times less risky than Dolby Laboratories. It trades about 0.02 of its potential returns per unit of risk. Dolby Laboratories is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,400  in Dolby Laboratories on September 3, 2024 and sell it today you would earn a total of  1,000.00  from holding Dolby Laboratories or generate 15.63% return on investment over 90 days.

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

Fuji Media Holdings  vs.  Dolby Laboratories

Fuji Media Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fuji Media Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fuji Media is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dolby Laboratories

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dolby Laboratories are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Dolby Laboratories reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fuji Media and Dolby Laboratories

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

The idea behind Fuji Media Holdings and Dolby Laboratories 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.