Correlation Between Renesas Electronics and Ams AG

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

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

Diversification Opportunities for Renesas Electronics and Ams AG

0.06

Correlation Coefficient

Renesas Electronics  Ams AG

Significant diversification

The 3 months correlation between Renesas and Ams is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics and ams AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ams AG 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 Ams AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ams AG has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and Ams AG go up and down completely randomly.

Pair Corralation between Renesas Electronics and Ams AG

Assuming the 90 days horizon Renesas Electronics is expected to generate 1841.39 times less return on investment than Ams AG. But when comparing it to its historical volatility, Renesas Electronics is 54.74 times less risky than Ams AG. It trades about 0.01 of its potential returns per unit of risk. ams AG is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  709.00  in ams AG on October 4, 2024 and sell it today you would earn a total of  26.00  from holding ams AG or generate 3.67% 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.  ams AG

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

ams AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ams AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Ams AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Renesas Electronics and Ams AG

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

The idea behind Renesas Electronics and ams AG 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.