Correlation Between Renesas Electronics and Hisense Home

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

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

Diversification Opportunities for Renesas Electronics and Hisense Home

0.1

Correlation Coefficient

Renesas Electronics  Hisense Home

Average diversification

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

Pair Corralation between Renesas Electronics and Hisense Home

Assuming the 90 days horizon Renesas Electronics is expected to generate 3.46 times less return on investment than Hisense Home. But when comparing it to its historical volatility, Renesas Electronics is 1.03 times less risky than Hisense Home. It trades about 0.03 of its potential returns per unit of risk. Hisense Home Appliances is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  295.00  in Hisense Home Appliances on October 24, 2024 and sell it today you would earn a total of  38.00  from holding Hisense Home Appliances or generate 12.88% 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.  Hisense Home Appliances

Renesas Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 1 (%) 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.

Hisense Home Appliances

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisense Home Appliances are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hisense Home reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renesas Electronics and Hisense Home

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

The idea behind Renesas Electronics and Hisense Home Appliances 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 Stocks Directory module to find actively traded stocks across global markets.