Correlation Between Renesas Electronics and Hang Seng

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

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

Diversification Opportunities for Renesas Electronics and Hang Seng

0.76

Correlation Coefficient

Renesas Electronics  Hang Seng

Poor diversification

The 3 months correlation between Renesas and Hang is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank 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 Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and Hang Seng go up and down completely randomly.

Pair Corralation between Renesas Electronics and Hang Seng

Assuming the 90 days horizon Renesas Electronics is expected to generate 0.77 times more return on investment than Hang Seng. However, Renesas Electronics is 1.3 times less risky than Hang Seng. It trades about 0.09 of its potential returns per unit of risk. Hang Seng Bank is currently generating about 0.07 per unit of risk. If you would invest  1,198  in Renesas Electronics on December 19, 2024 and sell it today you would earn a total of  202.00  from holding Renesas Electronics or generate 16.86% return on investment over 90 days.

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

Renesas Electronics  vs.  Hang Seng Bank

Renesas Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Renesas Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Hang Seng Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hang Seng reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renesas Electronics and Hang Seng

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

The idea behind Renesas Electronics and Hang Seng Bank 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.