Correlation Between Furukawa Electric and ABB

Can any of the company-specific risk be diversified away by investing in both Furukawa Electric and ABB 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 ABB 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 ABB Ltd ADR, you can compare the effects of market volatilities on Furukawa Electric and ABB 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 ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Furukawa Electric and ABB.

Diversification Opportunities for Furukawa Electric and ABB

0.86

Correlation Coefficient

Furukawa Electric  ABB

Very poor diversification

The 3 months correlation between Furukawa and ABB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Furukawa Electric Co and ABB Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB Ltd ADR 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB Ltd ADR has no effect on the direction of Furukawa Electric i.e., Furukawa Electric and ABB go up and down completely randomly.

Pair Corralation between Furukawa Electric and ABB

If you would invest  1,065  in Furukawa Electric Co on January 25, 2024 and sell it today you would earn a total of  17.00  from holding Furukawa Electric Co or generate 1.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.55%
Values	Daily Returns

Furukawa Electric Co  vs.  ABB Ltd ADR

Furukawa Electric

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Furukawa Electric Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Furukawa Electric showed solid returns over the last few months and may actually be approaching a breakup point.

ABB Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABB Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, ABB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Furukawa Electric and ABB

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

The idea behind Furukawa Electric Co and ABB 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.