Correlation Between Yamaha and Patterson Companies

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

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

Diversification Opportunities for Yamaha and Patterson Companies

-0.42

Correlation Coefficient

Yamaha  Patterson Companies

Very good diversification

The 3 months correlation between Yamaha and Patterson is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha and Patterson Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Patterson Companies 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 Patterson Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Patterson Companies has no effect on the direction of Yamaha i.e., Yamaha and Patterson Companies go up and down completely randomly.

Pair Corralation between Yamaha and Patterson Companies

Assuming the 90 days horizon Yamaha is expected to generate 3.48 times less return on investment than Patterson Companies. But when comparing it to its historical volatility, Yamaha is 1.41 times less risky than Patterson Companies. It trades about 0.02 of its potential returns per unit of risk. Patterson Companies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,361  in Patterson Companies on September 24, 2024 and sell it today you would earn a total of  579.00  from holding Patterson Companies or generate 24.52% return on investment over 90 days.

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

Yamaha  vs.  Patterson Companies

Yamaha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Patterson Companies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Patterson Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Patterson Companies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yamaha and Patterson Companies

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

The idea behind Yamaha and Patterson Companies 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.