Correlation Between Yamaha Corp and BANDAI NAMCO

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

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

Diversification Opportunities for Yamaha Corp and BANDAI NAMCO

0.64

Correlation Coefficient

Yamaha Corp  BANDAI NAMCO

Poor diversification

The 3 months correlation between Yamaha and BANDAI is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha Corp DRC and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings and Yamaha Corp 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 Yamaha Corp DRC are associated (or correlated) with BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Yamaha Corp i.e., Yamaha Corp and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between Yamaha Corp and BANDAI NAMCO

Assuming the 90 days horizon Yamaha Corp DRC is expected to under-perform the BANDAI NAMCO. In addition to that, Yamaha Corp is 1.12 times more volatile than BANDAI NAMCO Holdings. It trades about -0.1 of its total potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.0 per unit of volatility. If you would invest  2,140  in BANDAI NAMCO Holdings on September 13, 2024 and sell it today you would lose (20.00) from holding BANDAI NAMCO Holdings or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

Yamaha Corp DRC  vs.  BANDAI NAMCO Holdings

Yamaha Corp DRC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha Corp DRC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yamaha Corp and BANDAI NAMCO

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

The idea behind Yamaha Corp DRC and BANDAI NAMCO Holdings 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.