Correlation Between Fanuc and IHI Corp

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

Diversification Opportunities for Fanuc and IHI Corp

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Fanuc and IHI is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fanuc and IHI Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHI Corp ADR and Fanuc 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 Fanuc are associated (or correlated) with IHI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHI Corp ADR has no effect on the direction of Fanuc i.e., Fanuc and IHI Corp go up and down completely randomly.

Pair Corralation between Fanuc and IHI Corp

Assuming the 90 days horizon Fanuc is expected to under-perform the IHI Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fanuc is 2.66 times less risky than IHI Corp. The pink sheet trades about -0.02 of its potential returns per unit of risk. The IHI Corp ADR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  639.00  in IHI Corp ADR on September 1, 2024 and sell it today you would earn a total of  634.00  from holding IHI Corp ADR or generate 99.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.21%
ValuesDaily Returns

Fanuc  vs.  IHI Corp ADR

 Performance 
       Timeline  
Fanuc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fanuc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
IHI Corp ADR 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in IHI Corp ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, IHI Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Fanuc and IHI Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fanuc and IHI Corp

The main advantage of trading using opposite Fanuc and IHI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fanuc position performs unexpectedly, IHI Corp 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 IHI Corp will offset losses from the drop in IHI Corp's long position.
The idea behind Fanuc and IHI Corp 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.
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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