Correlation Between Yamaha Corp and Shimano

Can any of the company-specific risk be diversified away by investing in both Yamaha Corp and Shimano 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 Shimano 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 Shimano Inc ADR, you can compare the effects of market volatilities on Yamaha Corp and Shimano 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 Shimano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yamaha Corp and Shimano.

Diversification Opportunities for Yamaha Corp and Shimano

0.77

Correlation Coefficient

Yamaha Corp  Shimano

Poor diversification

The 3 months correlation between Yamaha and Shimano is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha Corp DRC and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc ADR 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Yamaha Corp i.e., Yamaha Corp and Shimano go up and down completely randomly.

Pair Corralation between Yamaha Corp and Shimano

Assuming the 90 days horizon Yamaha Corp DRC is expected to generate 1.35 times more return on investment than Shimano. However, Yamaha Corp is 1.35 times more volatile than Shimano Inc ADR. It trades about 0.12 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about 0.1 per unit of risk. If you would invest  707.00  in Yamaha Corp DRC on December 23, 2024 and sell it today you would earn a total of  120.00  from holding Yamaha Corp DRC or generate 16.97% return on investment over 90 days.

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

Yamaha Corp DRC  vs.  Shimano Inc ADR

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 9 (%) 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.

Shimano Inc ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shimano Inc ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Shimano may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Yamaha Corp and Shimano

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

The idea behind Yamaha Corp DRC and Shimano Inc ADR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.