Correlation Between Yamaha and Wartsila Oyj

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

By analyzing existing cross correlation between Yamaha Motor Co and Wartsila Oyj Abp, you can compare the effects of market volatilities on Yamaha and Wartsila Oyj 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 with a short position of Wartsila Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yamaha and Wartsila Oyj.

Diversification Opportunities for Yamaha and Wartsila Oyj

0.34

Correlation Coefficient

Yamaha  Wartsila Oyj

Weak diversification

The 3 months correlation between Yamaha and Wartsila is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha Motor Co and Wartsila Oyj Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wartsila Oyj Abp and Yamaha 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 Motor Co are associated (or correlated) with Wartsila Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wartsila Oyj Abp has no effect on the direction of Yamaha i.e., Yamaha and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Yamaha and Wartsila Oyj

Assuming the 90 days horizon Yamaha Motor Co is expected to under-perform the Wartsila Oyj. But the pink sheet apears to be less risky and, when comparing its historical volatility, Yamaha Motor Co is 1.99 times less risky than Wartsila Oyj. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Wartsila Oyj Abp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  365.00  in Wartsila Oyj Abp on October 12, 2024 and sell it today you would earn a total of  43.00  from holding Wartsila Oyj Abp or generate 11.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Yamaha Motor Co  vs.  Wartsila Oyj Abp

Yamaha Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Wartsila Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Yamaha and Wartsila Oyj

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

The idea behind Yamaha Motor Co and Wartsila Oyj Abp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.