Correlation Between Obayashi and Yellow Pages

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

By analyzing existing cross correlation between Obayashi and Yellow Pages Limited, you can compare the effects of market volatilities on Obayashi and Yellow Pages 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 Obayashi with a short position of Yellow Pages. Check out your portfolio center. Please also check ongoing floating volatility patterns of Obayashi and Yellow Pages.

Diversification Opportunities for Obayashi and Yellow Pages

-0.36

Correlation Coefficient

Obayashi  Yellow Pages

Very good diversification

The 3 months correlation between Obayashi and Yellow is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi and Yellow Pages Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yellow Pages Limited and Obayashi 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 Obayashi are associated (or correlated) with Yellow Pages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yellow Pages Limited has no effect on the direction of Obayashi i.e., Obayashi and Yellow Pages go up and down completely randomly.

Pair Corralation between Obayashi and Yellow Pages

Assuming the 90 days horizon Obayashi is expected to generate 0.03 times more return on investment than Yellow Pages. However, Obayashi is 28.63 times less risky than Yellow Pages. It trades about -0.13 of its potential returns per unit of risk. Yellow Pages Limited is currently generating about -0.01 per unit of risk. If you would invest  1,320  in Obayashi on December 28, 2024 and sell it today you would lose (20.00) from holding Obayashi or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Obayashi  vs.  Yellow Pages Limited

Obayashi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Obayashi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Obayashi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Yellow Pages Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Yellow Pages Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Yellow Pages is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Obayashi and Yellow Pages

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

The idea behind Obayashi and Yellow Pages Limited 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.