Correlation Between Murata Manufacturing and FIT Hon

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

By analyzing existing cross correlation between Murata Manufacturing and FIT Hon Teng, you can compare the effects of market volatilities on Murata Manufacturing and FIT Hon 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 Murata Manufacturing with a short position of FIT Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murata Manufacturing and FIT Hon.

Diversification Opportunities for Murata Manufacturing and FIT Hon

-0.65

Correlation Coefficient

Murata Manufacturing  FIT Hon

Excellent diversification

The 3 months correlation between Murata and FIT is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing and FIT Hon Teng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIT Hon Teng and Murata Manufacturing 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 Murata Manufacturing are associated (or correlated) with FIT Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIT Hon Teng has no effect on the direction of Murata Manufacturing i.e., Murata Manufacturing and FIT Hon go up and down completely randomly.

Pair Corralation between Murata Manufacturing and FIT Hon

Assuming the 90 days horizon Murata Manufacturing is expected to under-perform the FIT Hon. But the pink sheet apears to be less risky and, when comparing its historical volatility, Murata Manufacturing is 4.88 times less risky than FIT Hon. The pink sheet trades about -0.3 of its potential returns per unit of risk. The FIT Hon Teng is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  35.00  in FIT Hon Teng on September 20, 2024 and sell it today you would earn a total of  4.00  from holding FIT Hon Teng or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Murata Manufacturing  vs.  FIT Hon Teng

Murata Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murata Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

FIT Hon Teng

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIT Hon Teng are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, FIT Hon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Murata Manufacturing and FIT Hon

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

The idea behind Murata Manufacturing and FIT Hon Teng 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.