Correlation Between WILLIS LEASE and Yokohama Rubber

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

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

Diversification Opportunities for WILLIS LEASE and Yokohama Rubber

-0.24

Correlation Coefficient

WILLIS LEASE  Yokohama Rubber

Very good diversification

The 3 months correlation between WILLIS and Yokohama is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Yokohama Rubber go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Yokohama Rubber

Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the Yokohama Rubber. In addition to that, WILLIS LEASE is 2.06 times more volatile than The Yokohama Rubber. It trades about -0.04 of its total potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.13 per unit of volatility. If you would invest  1,948  in The Yokohama Rubber on December 23, 2024 and sell it today you would earn a total of  252.00  from holding The Yokohama Rubber or generate 12.94% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  The Yokohama Rubber

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Yokohama Rubber

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Yokohama Rubber exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WILLIS LEASE and Yokohama Rubber

The main advantage of trading using opposite WILLIS LEASE and Yokohama Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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 WILLIS LEASE FIN 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.