Correlation Between Renesas Electronics and SYSTEMAIR

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

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

Diversification Opportunities for Renesas Electronics and SYSTEMAIR

0.1

Correlation Coefficient

Renesas Electronics  SYSTEMAIR

Average diversification

The 3 months correlation between Renesas and SYSTEMAIR is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB and Renesas Electronics 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 Renesas Electronics are associated (or correlated) with SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and SYSTEMAIR go up and down completely randomly.

Pair Corralation between Renesas Electronics and SYSTEMAIR

Assuming the 90 days horizon Renesas Electronics is expected to generate 1.11 times more return on investment than SYSTEMAIR. However, Renesas Electronics is 1.11 times more volatile than SYSTEMAIR AB. It trades about 0.03 of its potential returns per unit of risk. SYSTEMAIR AB is currently generating about 0.01 per unit of risk. If you would invest  1,204  in Renesas Electronics on October 23, 2024 and sell it today you would earn a total of  41.00  from holding Renesas Electronics or generate 3.41% return on investment over 90 days.

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

Renesas Electronics  vs.  SYSTEMAIR AB

Renesas Electronics

Risk-Adjusted Performance

2 of 100

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.

SYSTEMAIR AB

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SYSTEMAIR is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Renesas Electronics and SYSTEMAIR

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

The idea behind Renesas Electronics and SYSTEMAIR AB 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.