Correlation Between Yamaha and Mueller Industries

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

By analyzing existing cross correlation between Yamaha and Mueller Industries, you can compare the effects of market volatilities on Yamaha and Mueller Industries 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 Mueller Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yamaha and Mueller Industries.

Diversification Opportunities for Yamaha and Mueller Industries

-0.58

Correlation Coefficient

Yamaha  Mueller Industries

Excellent diversification

The 3 months correlation between Yamaha and Mueller is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha and Mueller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mueller Industries 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 are associated (or correlated) with Mueller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mueller Industries has no effect on the direction of Yamaha i.e., Yamaha and Mueller Industries go up and down completely randomly.

Pair Corralation between Yamaha and Mueller Industries

Assuming the 90 days horizon Yamaha is expected to generate 0.81 times more return on investment than Mueller Industries. However, Yamaha is 1.23 times less risky than Mueller Industries. It trades about 0.07 of its potential returns per unit of risk. Mueller Industries is currently generating about -0.02 per unit of risk. If you would invest  690.00  in Yamaha on December 27, 2024 and sell it today you would earn a total of  47.00  from holding Yamaha or generate 6.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Yamaha  vs.  Mueller Industries

Yamaha

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Yamaha are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yamaha may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mueller Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mueller Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mueller Industries 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 and Mueller Industries

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

The idea behind Yamaha and Mueller Industries 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.