Correlation Between NORTHEAST UTILITIES and Yokohama Rubber

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Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES and Yokohama Rubber 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 NORTHEAST UTILITIES and Yokohama Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and The Yokohama Rubber, you can compare the effects of market volatilities on NORTHEAST UTILITIES and Yokohama Rubber 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 NORTHEAST UTILITIES with a short position of Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Yokohama Rubber.

Diversification Opportunities for NORTHEAST UTILITIES and Yokohama Rubber

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between NORTHEAST and Yokohama is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES are associated (or correlated) with Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Yokohama Rubber go up and down completely randomly.

Pair Corralation between NORTHEAST UTILITIES and Yokohama Rubber

Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to under-perform the Yokohama Rubber. In addition to that, NORTHEAST UTILITIES is 1.37 times more volatile than The Yokohama Rubber. It trades about -0.06 of its total potential returns per unit of risk. The Yokohama Rubber is currently generating about -0.04 per unit of volatility. If you would invest  2,040  in The Yokohama Rubber on October 25, 2024 and sell it today you would lose (20.00) from holding The Yokohama Rubber or give up 0.98% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy94.44%
ValuesDaily Returns

NORTHEAST UTILITIES  vs.  The Yokohama Rubber

 Performance 
       Timeline  
NORTHEAST UTILITIES 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NORTHEAST UTILITIES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Yokohama Rubber 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Yokohama Rubber may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NORTHEAST UTILITIES and Yokohama Rubber Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NORTHEAST UTILITIES and Yokohama Rubber

The main advantage of trading using opposite NORTHEAST UTILITIES and Yokohama Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES position performs unexpectedly, Yokohama Rubber 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 Yokohama Rubber will offset losses from the drop in Yokohama Rubber's long position.
The idea behind NORTHEAST UTILITIES and The Yokohama Rubber 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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