Correlation Between East Japan and Renesas Electronics
Can any of the company-specific risk be diversified away by investing in both East Japan and Renesas Electronics 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 East Japan and Renesas Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Japan Railway and Renesas Electronics, you can compare the effects of market volatilities on East Japan and Renesas Electronics 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 East Japan with a short position of Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and Renesas Electronics.
Diversification Opportunities for East Japan and Renesas Electronics
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between East and Renesas is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics and East Japan 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 East Japan Railway are associated (or correlated) with Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of East Japan i.e., East Japan and Renesas Electronics go up and down completely randomly.
Pair Corralation between East Japan and Renesas Electronics
Assuming the 90 days horizon East Japan Railway is expected to under-perform the Renesas Electronics. But the stock apears to be less risky and, when comparing its historical volatility, East Japan Railway is 2.16 times less risky than Renesas Electronics. The stock trades about -0.04 of its potential returns per unit of risk. The Renesas Electronics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,271 in Renesas Electronics on October 29, 2024 and sell it today you would earn a total of 30.00 from holding Renesas Electronics or generate 2.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
East Japan Railway vs. Renesas Electronics
Performance |
| Timeline |
| East Japan Railway |
| Renesas Electronics |
East Japan and Renesas Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and Renesas Electronics
The main advantage of trading using opposite East Japan and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan position performs unexpectedly, Renesas Electronics 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 Renesas Electronics will offset losses from the drop in Renesas Electronics' long position.| East Japan vs. Salesforce | East Japan vs. CODERE ONLINE LUX | East Japan vs. USWE SPORTS AB | East Japan vs. Air Transport Services |
| Renesas Electronics vs. Siemens Healthineers AG | Renesas Electronics vs. Vulcan Materials | Renesas Electronics vs. WESANA HEALTH HOLD | Renesas Electronics vs. Eagle Materials |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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