Correlation Between Arteris and Renesas Electronics

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

By analyzing existing cross correlation between Arteris and Renesas Electronics Corp, you can compare the effects of market volatilities on Arteris 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 Arteris with a short position of Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arteris and Renesas Electronics.

Diversification Opportunities for Arteris and Renesas Electronics

-0.52

Correlation Coefficient

Arteris  Renesas Electronics

Excellent diversification

The 3 months correlation between Arteris and Renesas is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Arteris and Renesas Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics Corp and Arteris 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 Arteris 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 Corp has no effect on the direction of Arteris i.e., Arteris and Renesas Electronics go up and down completely randomly.

Pair Corralation between Arteris and Renesas Electronics

Considering the 90-day investment horizon Arteris is expected to generate 2.24 times more return on investment than Renesas Electronics. However, Arteris is 2.24 times more volatile than Renesas Electronics Corp. It trades about 0.17 of its potential returns per unit of risk. Renesas Electronics Corp is currently generating about 0.0 per unit of risk. If you would invest  837.00  in Arteris on September 23, 2024 and sell it today you would earn a total of  111.00  from holding Arteris or generate 13.26% return on investment over 90 days.

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

Arteris  vs.  Renesas Electronics Corp

Arteris

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arteris are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward indicators, Arteris reported solid returns over the last few months and may actually be approaching a breakup point.

Renesas Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Arteris and Renesas Electronics

The main advantage of trading using opposite Arteris and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arteris 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 Arteris and Renesas Electronics Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.