Correlation Between Renesas Electronics and TOPPS TILES

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

By analyzing existing cross correlation between Renesas Electronics and TOPPS TILES PLC, you can compare the effects of market volatilities on Renesas Electronics and TOPPS TILES 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 TOPPS TILES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renesas Electronics and TOPPS TILES.

Diversification Opportunities for Renesas Electronics and TOPPS TILES

-0.41

Correlation Coefficient

Renesas Electronics  TOPPS TILES

Very good diversification

The 3 months correlation between Renesas and TOPPS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and TOPPS TILES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOPPS TILES PLC 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 TOPPS TILES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOPPS TILES PLC has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and TOPPS TILES go up and down completely randomly.

Pair Corralation between Renesas Electronics and TOPPS TILES

Assuming the 90 days horizon Renesas Electronics is expected to generate 1.71 times more return on investment than TOPPS TILES. However, Renesas Electronics is 1.71 times more volatile than TOPPS TILES PLC. It trades about 0.08 of its potential returns per unit of risk. TOPPS TILES PLC is currently generating about -0.15 per unit of risk. If you would invest  1,247  in Renesas Electronics on December 20, 2024 and sell it today you would earn a total of  176.00  from holding Renesas Electronics or generate 14.11% return on investment over 90 days.

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

Renesas Electronics  vs.  TOPPS TILES PLC

Renesas Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 6 (%) 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.

TOPPS TILES PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days TOPPS TILES PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Renesas Electronics and TOPPS TILES

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

The idea behind Renesas Electronics and TOPPS TILES PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.