Correlation Between Rohm Co and Infineon Technologies

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

By analyzing existing cross correlation between Rohm Co Ltd and Infineon Technologies AG, you can compare the effects of market volatilities on Rohm Co and Infineon Technologies 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 Rohm Co with a short position of Infineon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rohm Co and Infineon Technologies.

Diversification Opportunities for Rohm Co and Infineon Technologies

0.79

Correlation Coefficient

Rohm Co  Infineon Technologies

Poor diversification

The 3 months correlation between Rohm and Infineon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rohm Co Ltd and Infineon Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infineon Technologies and Rohm Co 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 Rohm Co Ltd are associated (or correlated) with Infineon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infineon Technologies has no effect on the direction of Rohm Co i.e., Rohm Co and Infineon Technologies go up and down completely randomly.

Pair Corralation between Rohm Co and Infineon Technologies

Assuming the 90 days horizon Rohm Co Ltd is expected to generate 1.11 times more return on investment than Infineon Technologies. However, Rohm Co is 1.11 times more volatile than Infineon Technologies AG. It trades about 0.06 of its potential returns per unit of risk. Infineon Technologies AG is currently generating about -0.03 per unit of risk. If you would invest  1,039  in Rohm Co Ltd on December 20, 2024 and sell it today you would earn a total of  29.00  from holding Rohm Co Ltd or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Rohm Co Ltd  vs.  Infineon Technologies AG

Rohm Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rohm Co Ltd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Rohm Co showed solid returns over the last few months and may actually be approaching a breakup point.

Infineon Technologies

Risk-Adjusted Performance

OK

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

Pair Trading with Rohm Co and Infineon Technologies

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

The idea behind Rohm Co Ltd and Infineon Technologies 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.