Correlation Between Japan Asia and Renesas Electronics

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

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

Diversification Opportunities for Japan Asia and Renesas Electronics

0.36

Correlation Coefficient

Japan Asia  Renesas Electronics

Weak diversification

The 3 months correlation between Japan and Renesas is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics and Japan Asia 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 Japan Asia Investment 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 has no effect on the direction of Japan Asia i.e., Japan Asia and Renesas Electronics go up and down completely randomly.

Pair Corralation between Japan Asia and Renesas Electronics

Assuming the 90 days horizon Japan Asia Investment is expected to generate 0.8 times more return on investment than Renesas Electronics. However, Japan Asia Investment is 1.24 times less risky than Renesas Electronics. It trades about 0.18 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.09 per unit of risk. If you would invest  122.00  in Japan Asia Investment on December 21, 2024 and sell it today you would earn a total of  39.00  from holding Japan Asia Investment or generate 31.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Japan Asia Investment  vs.  Renesas Electronics

Japan Asia Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

Renesas Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Renesas Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Asia and Renesas Electronics

The main advantage of trading using opposite Japan Asia and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Asia 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 Japan Asia Investment and Renesas Electronics 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.