Correlation Between Faraday Future and Renesas Electronics

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

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

Diversification Opportunities for Faraday Future and Renesas Electronics

0.68

Correlation Coefficient

Faraday Future  Renesas Electronics

Poor diversification

The 3 months correlation between Faraday and Renesas is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Future Intelligent 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 Faraday Future 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 Faraday Future Intelligent 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 Faraday Future i.e., Faraday Future and Renesas Electronics go up and down completely randomly.

Pair Corralation between Faraday Future and Renesas Electronics

Given the investment horizon of 90 days Faraday Future Intelligent is expected to generate 13.15 times more return on investment than Renesas Electronics. However, Faraday Future is 13.15 times more volatile than Renesas Electronics Corp. It trades about 0.26 of its potential returns per unit of risk. Renesas Electronics Corp is currently generating about -0.19 per unit of risk. If you would invest  115.00  in Faraday Future Intelligent on October 5, 2024 and sell it today you would earn a total of  128.00  from holding Faraday Future Intelligent or generate 111.3% return on investment over 90 days.

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

Faraday Future Intelligent  vs.  Renesas Electronics Corp

Faraday Future Intel

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Future Intelligent are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Faraday Future exhibited 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 weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Faraday Future and Renesas Electronics

The main advantage of trading using opposite Faraday Future and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Future 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 Faraday Future Intelligent 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.