Correlation Between Sino AG and FUJITSU

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Can any of the company-specific risk be diversified away by investing in both Sino AG and FUJITSU 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 Sino AG and FUJITSU into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sino AG and FUJITSU LTD ADR, you can compare the effects of market volatilities on Sino AG and FUJITSU 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 Sino AG with a short position of FUJITSU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sino AG and FUJITSU.

Diversification Opportunities for Sino AG and FUJITSU

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sino and FUJITSU is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sino AG and FUJITSU LTD ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJITSU LTD ADR and Sino AG 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 Sino AG are associated (or correlated) with FUJITSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJITSU LTD ADR has no effect on the direction of Sino AG i.e., Sino AG and FUJITSU go up and down completely randomly.

Pair Corralation between Sino AG and FUJITSU

Assuming the 90 days horizon Sino AG is expected to generate 0.88 times more return on investment than FUJITSU. However, Sino AG is 1.13 times less risky than FUJITSU. It trades about 0.1 of its potential returns per unit of risk. FUJITSU LTD ADR is currently generating about 0.08 per unit of risk. If you would invest  5,100  in Sino AG on September 7, 2024 and sell it today you would earn a total of  1,350  from holding Sino AG or generate 26.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sino AG  vs.  FUJITSU LTD ADR

 Performance 
       Timeline  
Sino AG 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sino AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sino AG reported solid returns over the last few months and may actually be approaching a breakup point.
FUJITSU LTD ADR 

Risk-Adjusted Performance

1 of 100

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

Sino AG and FUJITSU Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sino AG and FUJITSU

The main advantage of trading using opposite Sino AG and FUJITSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino AG position performs unexpectedly, FUJITSU 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 FUJITSU will offset losses from the drop in FUJITSU's long position.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Sino AG as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Sino AG's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Sino AG's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Sino AG.
The idea behind Sino AG and FUJITSU LTD ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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