Correlation Between Fukuyama Transporting and BII Railway

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

By analyzing existing cross correlation between Fukuyama Transporting Co and BII Railway Transportation, you can compare the effects of market volatilities on Fukuyama Transporting and BII Railway 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 Fukuyama Transporting with a short position of BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fukuyama Transporting and BII Railway.

Diversification Opportunities for Fukuyama Transporting and BII Railway

0.21

Correlation Coefficient

Fukuyama Transporting  BII Railway

Modest diversification

The 3 months correlation between Fukuyama and BII is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fukuyama Transporting Co and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor and Fukuyama Transporting 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 Fukuyama Transporting Co are associated (or correlated) with BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of Fukuyama Transporting i.e., Fukuyama Transporting and BII Railway go up and down completely randomly.

Pair Corralation between Fukuyama Transporting and BII Railway

Assuming the 90 days horizon Fukuyama Transporting Co is expected to generate 0.57 times more return on investment than BII Railway. However, Fukuyama Transporting Co is 1.77 times less risky than BII Railway. It trades about 0.04 of its potential returns per unit of risk. BII Railway Transportation is currently generating about 0.01 per unit of risk. If you would invest  1,596  in Fukuyama Transporting Co on September 28, 2024 and sell it today you would earn a total of  624.00  from holding Fukuyama Transporting Co or generate 39.1% return on investment over 90 days.

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

Fukuyama Transporting Co  vs.  BII Railway Transportation

Fukuyama Transporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fukuyama Transporting Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fukuyama Transporting is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BII Railway is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fukuyama Transporting and BII Railway

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

The idea behind Fukuyama Transporting Co and BII Railway Transportation 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.