Correlation Between ITALIAN WINE and Renesas Electronics

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

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

Diversification Opportunities for ITALIAN WINE and Renesas Electronics

-0.23

Correlation Coefficient

ITALIAN WINE  Renesas Electronics

Very good diversification

The 3 months correlation between ITALIAN and Renesas is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and Renesas Electronics go up and down completely randomly.

Pair Corralation between ITALIAN WINE and Renesas Electronics

Assuming the 90 days horizon ITALIAN WINE is expected to generate 5.69 times less return on investment than Renesas Electronics. In addition to that, ITALIAN WINE is 1.21 times more volatile than Renesas Electronics. It trades about 0.01 of its total potential returns per unit of risk. Renesas Electronics is currently generating about 0.1 per unit of volatility. If you would invest  1,261  in Renesas Electronics on October 11, 2024 and sell it today you would earn a total of  54.00  from holding Renesas Electronics or generate 4.28% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  Renesas Electronics

ITALIAN WINE BRANDS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Renesas Electronics

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Renesas Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ITALIAN WINE and Renesas Electronics

The main advantage of trading using opposite ITALIAN WINE and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.