Correlation Between Bridgestone Corp and ECARX Holdings

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

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

Diversification Opportunities for Bridgestone Corp and ECARX Holdings

0.75

Correlation Coefficient

Bridgestone Corp  ECARX Holdings

Poor diversification

The 3 months correlation between Bridgestone and ECARX is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone Corp ADR and ECARX Holdings Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Class and Bridgestone Corp 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 Bridgestone Corp ADR are associated (or correlated) with ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Class has no effect on the direction of Bridgestone Corp i.e., Bridgestone Corp and ECARX Holdings go up and down completely randomly.

Pair Corralation between Bridgestone Corp and ECARX Holdings

Assuming the 90 days horizon Bridgestone Corp is expected to generate 1.49 times less return on investment than ECARX Holdings. But when comparing it to its historical volatility, Bridgestone Corp ADR is 4.97 times less risky than ECARX Holdings. It trades about 0.22 of its potential returns per unit of risk. ECARX Holdings Class is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  196.00  in ECARX Holdings Class on December 29, 2024 and sell it today you would earn a total of  30.00  from holding ECARX Holdings Class or generate 15.31% return on investment over 90 days.

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

Bridgestone Corp ADR  vs.  ECARX Holdings Class

Bridgestone Corp ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgestone Corp ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Bridgestone Corp showed solid returns over the last few months and may actually be approaching a breakup point.

ECARX Holdings Class

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bridgestone Corp and ECARX Holdings

The main advantage of trading using opposite Bridgestone Corp and ECARX Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone Corp position performs unexpectedly, ECARX Holdings 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 ECARX Holdings will offset losses from the drop in ECARX Holdings' long position.

The idea behind Bridgestone Corp ADR and ECARX Holdings Class 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.