Correlation Between Renault SA and Mazda

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

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

Diversification Opportunities for Renault SA and Mazda

0.51

Correlation Coefficient

Renault SA  Mazda

Very weak diversification

The 3 months correlation between Renault and Mazda is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Mazda Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor and Renault SA 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 Renault SA are associated (or correlated) with Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor has no effect on the direction of Renault SA i.e., Renault SA and Mazda go up and down completely randomly.

Pair Corralation between Renault SA and Mazda

Assuming the 90 days horizon Renault SA is expected to generate 1.52 times less return on investment than Mazda. But when comparing it to its historical volatility, Renault SA is 1.32 times less risky than Mazda. It trades about 0.05 of its potential returns per unit of risk. Mazda Motor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  675.00  in Mazda Motor on December 26, 2024 and sell it today you would earn a total of  55.00  from holding Mazda Motor or generate 8.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Renault SA  vs.  Mazda Motor

Renault SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Renault SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mazda Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mazda Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Mazda may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Renault SA and Mazda

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

The idea behind Renault SA and Mazda 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.