Correlation Between Infineon Technologies and Renesas Electronics
Can any of the company-specific risk be diversified away by investing in both Infineon Technologies 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 Infineon Technologies and Renesas Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Infineon Technologies AG and Renesas Electronics, you can compare the effects of market volatilities on Infineon Technologies 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 Infineon Technologies with a short position of Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infineon Technologies and Renesas Electronics.
Diversification Opportunities for Infineon Technologies and Renesas Electronics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Infineon and Renesas is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Infineon Technologies AG and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics and Infineon Technologies 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 Infineon Technologies AG 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 Infineon Technologies i.e., Infineon Technologies and Renesas Electronics go up and down completely randomly.
Pair Corralation between Infineon Technologies and Renesas Electronics
Assuming the 90 days horizon Infineon Technologies is expected to generate 5.86 times less return on investment than Renesas Electronics. But when comparing it to its historical volatility, Infineon Technologies AG is 1.42 times less risky than Renesas Electronics. It trades about 0.01 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 945.00 in Renesas Electronics on August 25, 2024 and sell it today you would earn a total of 350.00 from holding Renesas Electronics or generate 37.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.95% |
| Values | Daily Returns |
Infineon Technologies AG vs. Renesas Electronics
Performance |
| Timeline |
| Infineon Technologies |
| Renesas Electronics |
Infineon Technologies and Renesas Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Infineon Technologies and Renesas Electronics
The main advantage of trading using opposite Infineon Technologies and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infineon Technologies 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.The idea behind Infineon Technologies AG and Renesas Electronics 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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