Correlation Between Furukawa Electric and Kao
Can any of the company-specific risk be diversified away by investing in both Furukawa Electric and Kao 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 Furukawa Electric and Kao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Furukawa Electric Co and Kao Corporation, you can compare the effects of market volatilities on Furukawa Electric and Kao 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 Furukawa Electric with a short position of Kao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Furukawa Electric and Kao.
Diversification Opportunities for Furukawa Electric and Kao
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Furukawa and Kao is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Furukawa Electric Co and Kao Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Corporation and Furukawa Electric 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 Furukawa Electric Co are associated (or correlated) with Kao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Corporation has no effect on the direction of Furukawa Electric i.e., Furukawa Electric and Kao go up and down completely randomly.
Pair Corralation between Furukawa Electric and Kao
Assuming the 90 days horizon Furukawa Electric Co is expected to generate 2.04 times more return on investment than Kao. However, Furukawa Electric is 2.04 times more volatile than Kao Corporation. It trades about 0.17 of its potential returns per unit of risk. Kao Corporation is currently generating about 0.03 per unit of risk. If you would invest 1,455 in Furukawa Electric Co on September 4, 2024 and sell it today you would earn a total of 2,345 from holding Furukawa Electric Co or generate 161.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 58.5% |
| Values | Daily Returns |
Furukawa Electric Co vs. Kao Corp.
Performance |
| Timeline |
| Furukawa Electric |
| Kao Corporation |
Furukawa Electric and Kao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Furukawa Electric and Kao
The main advantage of trading using opposite Furukawa Electric and Kao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Furukawa Electric position performs unexpectedly, Kao 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 Kao will offset losses from the drop in Kao's long position.| Furukawa Electric vs. Legrand SA ADR | Furukawa Electric vs. Loop Energy | Furukawa Electric vs. Sunrise New Energy | Furukawa Electric vs. Alfen NV |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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