Correlation Between Renesas Electronics and General Electric

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

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

Diversification Opportunities for Renesas Electronics and General Electric

0.19

Correlation Coefficient

Renesas Electronics  General Electric

Average diversification

The 3 months correlation between Renesas and General is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and General Electric go up and down completely randomly.

Pair Corralation between Renesas Electronics and General Electric

Assuming the 90 days horizon Renesas Electronics is expected to generate 1.93 times less return on investment than General Electric. In addition to that, Renesas Electronics is 1.47 times more volatile than General Electric. It trades about 0.03 of its total potential returns per unit of risk. General Electric is currently generating about 0.09 per unit of volatility. If you would invest  7,363  in General Electric on October 23, 2024 and sell it today you would earn a total of  10,337  from holding General Electric or generate 140.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Renesas Electronics  vs.  General Electric

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.

General Electric

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Renesas Electronics and General Electric

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

The idea behind Renesas Electronics and General Electric 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.