Correlation Between AMADEUS IT and Yokohama Rubber

Can any of the company-specific risk be diversified away by investing in both AMADEUS IT 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 AMADEUS IT and Yokohama Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AMADEUS IT GRP and The Yokohama Rubber, you can compare the effects of market volatilities on AMADEUS IT 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 AMADEUS IT with a short position of Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMADEUS IT and Yokohama Rubber.

Diversification Opportunities for AMADEUS IT and Yokohama Rubber

-0.06

Correlation Coefficient

AMADEUS IT  Yokohama Rubber

Good diversification

The 3 months correlation between AMADEUS and Yokohama is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding AMADEUS IT GRP and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber and AMADEUS IT 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 AMADEUS IT GRP 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 AMADEUS IT i.e., AMADEUS IT and Yokohama Rubber go up and down completely randomly.

Pair Corralation between AMADEUS IT and Yokohama Rubber

Assuming the 90 days trading horizon AMADEUS IT is expected to generate 1.64 times less return on investment than Yokohama Rubber. But when comparing it to its historical volatility, AMADEUS IT GRP is 1.41 times less risky than Yokohama Rubber. It trades about 0.04 of its potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,450  in The Yokohama Rubber on October 10, 2024 and sell it today you would earn a total of  570.00  from holding The Yokohama Rubber or generate 39.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AMADEUS IT GRP  vs.  The Yokohama Rubber

AMADEUS IT GRP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMADEUS IT GRP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AMADEUS IT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Yokohama Rubber

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AMADEUS IT and Yokohama Rubber

The main advantage of trading using opposite AMADEUS IT and Yokohama Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMADEUS IT 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 AMADEUS IT GRP 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.