Correlation Between Yamaha and RTL Group

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

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

Diversification Opportunities for Yamaha and RTL Group

0.85

Correlation Coefficient

Yamaha  RTL Group

Very poor diversification

The 3 months correlation between Yamaha and RTL is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of Yamaha i.e., Yamaha and RTL Group go up and down completely randomly.

Pair Corralation between Yamaha and RTL Group

Assuming the 90 days horizon Yamaha is expected to generate 4.05 times less return on investment than RTL Group. But when comparing it to its historical volatility, Yamaha is 1.04 times less risky than RTL Group. It trades about 0.07 of its potential returns per unit of risk. RTL Group SA is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  2,690  in RTL Group SA on December 26, 2024 and sell it today you would earn a total of  920.00  from holding RTL Group SA or generate 34.2% return on investment over 90 days.

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

Yamaha  vs.  RTL Group SA

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.

RTL Group SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RTL Group SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, RTL Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yamaha and RTL Group

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

The idea behind Yamaha and RTL Group SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.