Correlation Between Ferrari NV and Suzuki

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

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

Diversification Opportunities for Ferrari NV and Suzuki

-0.17

Correlation Coefficient

Ferrari NV  Suzuki

Good diversification

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

Pair Corralation between Ferrari NV and Suzuki

Given the investment horizon of 90 days Ferrari NV is expected to generate 57.47 times less return on investment than Suzuki. But when comparing it to its historical volatility, Ferrari NV is 42.48 times less risky than Suzuki. It trades about 0.11 of its potential returns per unit of risk. Suzuki Motor is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,399  in Suzuki Motor on September 17, 2024 and sell it today you would lose (2,212) from holding Suzuki Motor or give up 65.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.94%
Values	Daily Returns

Ferrari NV  vs.  Suzuki Motor

Ferrari NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferrari NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Ferrari NV is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Suzuki Motor

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Ferrari NV and Suzuki

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

The idea behind Ferrari NV and Suzuki Motor 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.