Correlation Between Renesas Electronics and Kingspan Group

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

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

Diversification Opportunities for Renesas Electronics and Kingspan Group

0.17

Correlation Coefficient

Renesas Electronics  Kingspan Group

Average diversification

The 3 months correlation between Renesas and Kingspan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group 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 Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and Kingspan Group go up and down completely randomly.

Pair Corralation between Renesas Electronics and Kingspan Group

Assuming the 90 days horizon Renesas Electronics is expected to generate 1.94 times more return on investment than Kingspan Group. However, Renesas Electronics is 1.94 times more volatile than Kingspan Group plc. It trades about 0.09 of its potential returns per unit of risk. Kingspan Group plc is currently generating about 0.15 per unit of risk. If you would invest  1,213  in Renesas Electronics on December 22, 2024 and sell it today you would earn a total of  196.00  from holding Renesas Electronics or generate 16.16% 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.  Kingspan Group plc

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 fragile basic indicators, Renesas Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Kingspan Group plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Kingspan Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renesas Electronics and Kingspan Group

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

The idea behind Renesas Electronics and Kingspan Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.