Correlation Between Renesas Electronics and Asm Pacific

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

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

Diversification Opportunities for Renesas Electronics and Asm Pacific

0.65

Correlation Coefficient

Renesas Electronics  Asm Pacific

Poor diversification

The 3 months correlation between Renesas and Asm is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Renesas Electronics Corp and Asm Pacific Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asm Pacific Technology 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 Corp are associated (or correlated) with Asm Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asm Pacific Technology has no effect on the direction of Renesas Electronics i.e., Renesas Electronics and Asm Pacific go up and down completely randomly.

Pair Corralation between Renesas Electronics and Asm Pacific

Assuming the 90 days horizon Renesas Electronics Corp is expected to generate 0.95 times more return on investment than Asm Pacific. However, Renesas Electronics Corp is 1.05 times less risky than Asm Pacific. It trades about 0.0 of its potential returns per unit of risk. Asm Pacific Technology is currently generating about -0.1 per unit of risk. If you would invest  658.00  in Renesas Electronics Corp on October 22, 2024 and sell it today you would lose (11.00) from holding Renesas Electronics Corp or give up 1.67% of portfolio value over 90 days.

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

Renesas Electronics Corp  vs.  Asm Pacific Technology

Renesas Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Renesas Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Asm Pacific Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Asm Pacific Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Renesas Electronics and Asm Pacific

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

The idea behind Renesas Electronics Corp and Asm Pacific Technology 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.