Correlation Between Renault SA and Nissan

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

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

Diversification Opportunities for Renault SA and Nissan

-0.24

Correlation Coefficient

Renault SA  Nissan

Very good diversification

The 3 months correlation between Renault and Nissan is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Nissan Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan 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 Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Motor has no effect on the direction of Renault SA i.e., Renault SA and Nissan go up and down completely randomly.

Pair Corralation between Renault SA and Nissan

If you would invest  868.00  in Nissan Motor Co on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Nissan Motor Co or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Renault SA  vs.  Nissan Motor Co

Renault SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nissan Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Renault SA and Nissan

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

The idea behind Renault SA and Nissan Motor Co 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.