Correlation Between Subaru Corp and Renault SA

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

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

Diversification Opportunities for Subaru Corp and Renault SA

0.61

Correlation Coefficient

Subaru Corp  Renault SA

Poor diversification

The 3 months correlation between Subaru and Renault is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Subaru Corp ADR and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA and Subaru 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 Subaru Corp ADR are associated (or correlated) with Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Subaru Corp i.e., Subaru Corp and Renault SA go up and down completely randomly.

Pair Corralation between Subaru Corp and Renault SA

Assuming the 90 days horizon Subaru Corp ADR is expected to generate 1.03 times more return on investment than Renault SA. However, Subaru Corp is 1.03 times more volatile than Renault SA. It trades about 0.08 of its potential returns per unit of risk. Renault SA is currently generating about 0.07 per unit of risk. If you would invest  889.00  in Subaru Corp ADR on December 27, 2024 and sell it today you would earn a total of  80.00  from holding Subaru Corp ADR or generate 9.0% return on investment over 90 days.

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

Subaru Corp ADR  vs.  Renault SA

Subaru Corp ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Subaru Corp ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Subaru Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Renault SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Renault SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Subaru Corp and Renault SA

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

The idea behind Subaru Corp ADR and Renault SA 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.