Correlation Between UTD OV and Fukuoka Financial

Can any of the company-specific risk be diversified away by investing in both UTD OV and Fukuoka Financial 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 UTD OV and Fukuoka Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UTD OV BK LOC ADR1 and Fukuoka Financial Group, you can compare the effects of market volatilities on UTD OV and Fukuoka Financial 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 UTD OV with a short position of Fukuoka Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of UTD OV and Fukuoka Financial.

Diversification Opportunities for UTD OV and Fukuoka Financial

0.9

Correlation Coefficient

UTD OV  Fukuoka Financial

Almost no diversification

The 3 months correlation between UTD and Fukuoka is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding UTD OV BK LOC ADR1 and Fukuoka Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fukuoka Financial and UTD OV 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 UTD OV BK LOC ADR1 are associated (or correlated) with Fukuoka Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fukuoka Financial has no effect on the direction of UTD OV i.e., UTD OV and Fukuoka Financial go up and down completely randomly.

Pair Corralation between UTD OV and Fukuoka Financial

Assuming the 90 days trading horizon UTD OV BK LOC ADR1 is expected to generate 0.57 times more return on investment than Fukuoka Financial. However, UTD OV BK LOC ADR1 is 1.77 times less risky than Fukuoka Financial. It trades about 0.06 of its potential returns per unit of risk. Fukuoka Financial Group is currently generating about 0.02 per unit of risk. If you would invest  3,591  in UTD OV BK LOC ADR1 on September 21, 2024 and sell it today you would earn a total of  1,509  from holding UTD OV BK LOC ADR1 or generate 42.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

UTD OV BK LOC ADR1  vs.  Fukuoka Financial Group

UTD OV BK

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UTD OV BK LOC ADR1 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, UTD OV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fukuoka Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fukuoka Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fukuoka Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UTD OV and Fukuoka Financial

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

The idea behind UTD OV BK LOC ADR1 and Fukuoka Financial Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.