Correlation Between Murata Manufacturing and Fuji Electric

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

By analyzing existing cross correlation between Murata Manufacturing and Fuji Electric Co, you can compare the effects of market volatilities on Murata Manufacturing and Fuji Electric 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 Fuji Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murata Manufacturing and Fuji Electric.

Diversification Opportunities for Murata Manufacturing and Fuji Electric

-0.22

Correlation Coefficient

Murata Manufacturing  Fuji Electric

Very good diversification

The 3 months correlation between Murata and Fuji is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing and Fuji Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuji Electric 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 Fuji Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuji Electric has no effect on the direction of Murata Manufacturing i.e., Murata Manufacturing and Fuji Electric go up and down completely randomly.

Pair Corralation between Murata Manufacturing and Fuji Electric

Assuming the 90 days horizon Murata Manufacturing is expected to generate 5.84 times less return on investment than Fuji Electric. But when comparing it to its historical volatility, Murata Manufacturing is 1.03 times less risky than Fuji Electric. It trades about 0.01 of its potential returns per unit of risk. Fuji Electric Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,619  in Fuji Electric Co on February 4, 2024 and sell it today you would earn a total of  1,305  from holding Fuji Electric Co or generate 28.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.17%
Values	Daily Returns

Murata Manufacturing  vs.  Fuji Electric Co

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 latest inconsistent 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.

Fuji Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fuji Electric Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fuji Electric is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Murata Manufacturing and Fuji Electric

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

The idea behind Murata Manufacturing and Fuji Electric Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.