Correlation Between Renault SA and Yamaha

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

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

Diversification Opportunities for Renault SA and Yamaha

0.02

Correlation Coefficient

Renault SA  Yamaha

Significant diversification

The 3 months correlation between Renault and Yamaha is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Yamaha Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Motor has no effect on the direction of Renault SA i.e., Renault SA and Yamaha go up and down completely randomly.

Pair Corralation between Renault SA and Yamaha

Assuming the 90 days horizon Renault SA is expected to under-perform the Yamaha. In addition to that, Renault SA is 1.02 times more volatile than Yamaha Motor Co. It trades about -0.04 of its total potential returns per unit of risk. Yamaha Motor Co is currently generating about -0.04 per unit of volatility. If you would invest  885.00  in Yamaha Motor Co on September 3, 2024 and sell it today you would lose (55.00) from holding Yamaha Motor Co or give up 6.21% of portfolio value over 90 days.

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

Renault SA  vs.  Yamaha 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.

Yamaha Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Renault SA and Yamaha

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

The idea behind Renault SA and Yamaha 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.