Correlation Between Hubbell and Furukawa Electric

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

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

Diversification Opportunities for Hubbell and Furukawa Electric

0.32

Correlation Coefficient

Hubbell  Furukawa Electric

Weak diversification

The 3 months correlation between Hubbell and Furukawa is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hubbell and Furukawa Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Furukawa Electric and Hubbell 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 Hubbell are associated (or correlated) with Furukawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Furukawa Electric has no effect on the direction of Hubbell i.e., Hubbell and Furukawa Electric go up and down completely randomly.

Pair Corralation between Hubbell and Furukawa Electric

Given the investment horizon of 90 days Hubbell is expected to generate 1.69 times less return on investment than Furukawa Electric. But when comparing it to its historical volatility, Hubbell is 2.56 times less risky than Furukawa Electric. It trades about 0.21 of its potential returns per unit of risk. Furukawa Electric Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,749  in Furukawa Electric Co on September 5, 2024 and sell it today you would earn a total of  1,051  from holding Furukawa Electric Co or generate 38.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Hubbell  vs.  Furukawa Electric Co

Hubbell

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hubbell are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Hubbell sustained solid returns over the last few months and may actually be approaching a breakup point.

Furukawa Electric

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Furukawa Electric Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Furukawa Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hubbell and Furukawa Electric

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

The idea behind Hubbell and Furukawa Electric Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.