Correlation Between Kawasaki Kisen and Yokohama Rubber

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

By analyzing existing cross correlation between Kawasaki Kisen Kaisha and The Yokohama Rubber, you can compare the effects of market volatilities on Kawasaki Kisen and Yokohama Rubber 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 Kawasaki Kisen with a short position of Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kawasaki Kisen and Yokohama Rubber.

Diversification Opportunities for Kawasaki Kisen and Yokohama Rubber

0.39

Correlation Coefficient

Kawasaki Kisen  Yokohama Rubber

Weak diversification

The 3 months correlation between Kawasaki and Yokohama is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Kawasaki Kisen Kaisha and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber and Kawasaki Kisen 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 Kawasaki Kisen Kaisha are associated (or correlated) with Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Kawasaki Kisen i.e., Kawasaki Kisen and Yokohama Rubber go up and down completely randomly.

Pair Corralation between Kawasaki Kisen and Yokohama Rubber

Assuming the 90 days trading horizon Kawasaki Kisen is expected to generate 1.3 times less return on investment than Yokohama Rubber. In addition to that, Kawasaki Kisen is 1.26 times more volatile than The Yokohama Rubber. It trades about 0.12 of its total potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.19 per unit of volatility. If you would invest  1,950  in The Yokohama Rubber on October 4, 2024 and sell it today you would earn a total of  90.00  from holding The Yokohama Rubber or generate 4.62% return on investment over 90 days.

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

Kawasaki Kisen Kaisha  vs.  The Yokohama Rubber

Kawasaki Kisen Kaisha

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kawasaki Kisen Kaisha are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Kawasaki Kisen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Yokohama Rubber

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kawasaki Kisen and Yokohama Rubber

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

The idea behind Kawasaki Kisen Kaisha and The Yokohama Rubber 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.