Correlation Between Shimano and Yamaha Corp

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

By analyzing existing cross correlation between Shimano Inc ADR and Yamaha Corp DRC, you can compare the effects of market volatilities on Shimano and Yamaha Corp 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 Shimano with a short position of Yamaha Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shimano and Yamaha Corp.

Diversification Opportunities for Shimano and Yamaha Corp

0.8

Correlation Coefficient

Shimano  Yamaha Corp

Very poor diversification

The 3 months correlation between Shimano and Yamaha is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shimano Inc ADR and Yamaha Corp DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha Corp DRC and Shimano 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 Shimano Inc ADR are associated (or correlated) with Yamaha Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Corp DRC has no effect on the direction of Shimano i.e., Shimano and Yamaha Corp go up and down completely randomly.

Pair Corralation between Shimano and Yamaha Corp

Assuming the 90 days horizon Shimano is expected to generate 2.95 times less return on investment than Yamaha Corp. But when comparing it to its historical volatility, Shimano Inc ADR is 1.31 times less risky than Yamaha Corp. It trades about 0.04 of its potential returns per unit of risk. Yamaha Corp DRC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  703.00  in Yamaha Corp DRC on December 29, 2024 and sell it today you would earn a total of  95.00  from holding Yamaha Corp DRC or generate 13.51% return on investment over 90 days.

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

Shimano Inc ADR  vs.  Yamaha Corp DRC

Shimano Inc ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shimano Inc ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Shimano is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Yamaha Corp DRC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yamaha Corp DRC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Yamaha Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shimano and Yamaha Corp

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

The idea behind Shimano Inc ADR and Yamaha Corp DRC 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.