Correlation Between Werner Enterprises and Yokohama Rubber

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

By analyzing existing cross correlation between Werner Enterprises and The Yokohama Rubber, you can compare the effects of market volatilities on Werner Enterprises and Yokohama Rubber 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 Werner Enterprises with a short position of Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Werner Enterprises and Yokohama Rubber.

Diversification Opportunities for Werner Enterprises and Yokohama Rubber

-0.35

Correlation Coefficient

Werner Enterprises  Yokohama Rubber

Very good diversification

The 3 months correlation between Werner and Yokohama is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Werner Enterprises and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber and Werner Enterprises 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 Werner Enterprises are associated (or correlated) with Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of Werner Enterprises i.e., Werner Enterprises and Yokohama Rubber go up and down completely randomly.

Pair Corralation between Werner Enterprises and Yokohama Rubber

Assuming the 90 days horizon Werner Enterprises is expected to generate 3.23 times less return on investment than Yokohama Rubber. In addition to that, Werner Enterprises is 1.24 times more volatile than The Yokohama Rubber. It trades about 0.02 of its total potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.09 per unit of volatility. If you would invest  1,850  in The Yokohama Rubber on October 24, 2024 and sell it today you would earn a total of  150.00  from holding The Yokohama Rubber or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Werner Enterprises  vs.  The Yokohama Rubber

Werner Enterprises

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Werner Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Werner Enterprises is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Yokohama Rubber

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Yokohama Rubber may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Werner Enterprises and Yokohama Rubber

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

The idea behind Werner Enterprises and The Yokohama Rubber 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.