Correlation Between Yamaha and Kawasaki Heavy
Can any of the company-specific risk be diversified away by investing in both Yamaha and Kawasaki Heavy 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 Yamaha and Kawasaki Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Yamaha Motor Co and Kawasaki Heavy Industries, you can compare the effects of market volatilities on Yamaha and Kawasaki Heavy 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 Yamaha with a short position of Kawasaki Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yamaha and Kawasaki Heavy.
Diversification Opportunities for Yamaha and Kawasaki Heavy
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Yamaha and Kawasaki is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha Motor Co and Kawasaki Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kawasaki Heavy Industries and Yamaha 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 Yamaha Motor Co are associated (or correlated) with Kawasaki Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kawasaki Heavy Industries has no effect on the direction of Yamaha i.e., Yamaha and Kawasaki Heavy go up and down completely randomly.
Pair Corralation between Yamaha and Kawasaki Heavy
Assuming the 90 days horizon Yamaha is expected to generate 5.18 times less return on investment than Kawasaki Heavy. But when comparing it to its historical volatility, Yamaha Motor Co is 1.27 times less risky than Kawasaki Heavy. It trades about 0.02 of its potential returns per unit of risk. Kawasaki Heavy Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 855.00 in Kawasaki Heavy Industries on September 4, 2024 and sell it today you would earn a total of 747.00 from holding Kawasaki Heavy Industries or generate 87.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.79% |
| Values | Daily Returns |
Yamaha Motor Co vs. Kawasaki Heavy Industries
Performance |
| Timeline |
| Yamaha Motor |
| Kawasaki Heavy Industries |
Yamaha and Kawasaki Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Yamaha and Kawasaki Heavy
The main advantage of trading using opposite Yamaha and Kawasaki Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yamaha position performs unexpectedly, Kawasaki Heavy 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 Kawasaki Heavy will offset losses from the drop in Kawasaki Heavy's long position.| Yamaha vs. Isuzu Motors | Yamaha vs. Renault SA | Yamaha vs. Mazda Motor Corp | Yamaha vs. Bayerische Motoren Werke |
| Kawasaki Heavy vs. Mitsubishi Heavy Industries | Kawasaki Heavy vs. Yamaha Motor Co | Kawasaki Heavy vs. Mitsubishi Electric Corp | Kawasaki Heavy vs. Isuzu Motors |
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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