Correlation Between Four Seasons and Mazda

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

By analyzing existing cross correlation between Four Seasons Education and Mazda Motor, you can compare the effects of market volatilities on Four Seasons and Mazda 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 Four Seasons with a short position of Mazda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Four Seasons and Mazda.

Diversification Opportunities for Four Seasons and Mazda

-0.51

Correlation Coefficient

Four Seasons  Mazda

Excellent diversification

The 3 months correlation between Four and Mazda is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Four Seasons Education and Mazda Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor and Four Seasons 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 Four Seasons Education are associated (or correlated) with Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor has no effect on the direction of Four Seasons i.e., Four Seasons and Mazda go up and down completely randomly.

Pair Corralation between Four Seasons and Mazda

Given the investment horizon of 90 days Four Seasons is expected to generate 1.9 times less return on investment than Mazda. In addition to that, Four Seasons is 2.07 times more volatile than Mazda Motor. It trades about 0.01 of its total potential returns per unit of risk. Mazda Motor is currently generating about 0.05 per unit of volatility. If you would invest  629.00  in Mazda Motor on December 5, 2024 and sell it today you would earn a total of  35.00  from holding Mazda Motor or generate 5.56% return on investment over 90 days.

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

Four Seasons Education  vs.  Mazda Motor

Four Seasons Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Four Seasons Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Four Seasons is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mazda Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mazda Motor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Mazda may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Four Seasons and Mazda

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

The idea behind Four Seasons Education and Mazda Motor 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.