Correlation Between Subaru Corp and Mazda
Can any of the company-specific risk be diversified away by investing in both Subaru Corp and Mazda 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 Subaru Corp and Mazda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Subaru Corp ADR and Mazda Motor Corp, you can compare the effects of market volatilities on Subaru Corp and Mazda 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 Subaru Corp with a short position of Mazda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subaru Corp and Mazda.
Diversification Opportunities for Subaru Corp and Mazda
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Subaru and Mazda is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Subaru Corp ADR and Mazda Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor Corp and Subaru Corp 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 Subaru Corp ADR are associated (or correlated) with Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor Corp has no effect on the direction of Subaru Corp i.e., Subaru Corp and Mazda go up and down completely randomly.
Pair Corralation between Subaru Corp and Mazda
Assuming the 90 days horizon Subaru Corp ADR is expected to generate 1.03 times more return on investment than Mazda. However, Subaru Corp is 1.03 times more volatile than Mazda Motor Corp. It trades about -0.19 of its potential returns per unit of risk. Mazda Motor Corp is currently generating about -0.2 per unit of risk. If you would invest 890.00 in Subaru Corp ADR on August 28, 2024 and sell it today you would lose (96.00) from holding Subaru Corp ADR or give up 10.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Subaru Corp ADR vs. Mazda Motor Corp
Performance |
| Timeline |
| Subaru Corp ADR |
| Mazda Motor Corp |
Subaru Corp and Mazda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Subaru Corp and Mazda
The main advantage of trading using opposite Subaru Corp and Mazda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subaru Corp position performs unexpectedly, Mazda 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 Mazda will offset losses from the drop in Mazda's long position.| Subaru Corp vs. Mazda Motor Corp | Subaru Corp vs. Subaru Corp | Subaru Corp vs. Bayerische Motoren Werke | Subaru Corp vs. Bridgestone Corp ADR |
| Mazda vs. Subaru Corp ADR | Mazda vs. Suzuki Motor Corp | Mazda vs. Isuzu Motors | Mazda vs. Bayerische Motoren Werke |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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