Correlation Between Yokohama Rubber and Franco Nevada

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

By analyzing existing cross correlation between The Yokohama Rubber and Franco Nevada, you can compare the effects of market volatilities on Yokohama Rubber and Franco Nevada 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 Yokohama Rubber with a short position of Franco Nevada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yokohama Rubber and Franco Nevada.

Diversification Opportunities for Yokohama Rubber and Franco Nevada

0.02

Correlation Coefficient

Yokohama Rubber  Franco Nevada

Significant diversification

The 3 months correlation between Yokohama and Franco is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding The Yokohama Rubber and Franco Nevada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franco Nevada and Yokohama Rubber 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 The Yokohama Rubber are associated (or correlated) with Franco Nevada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franco Nevada has no effect on the direction of Yokohama Rubber i.e., Yokohama Rubber and Franco Nevada go up and down completely randomly.

Pair Corralation between Yokohama Rubber and Franco Nevada

Assuming the 90 days trading horizon The Yokohama Rubber is expected to generate 0.89 times more return on investment than Franco Nevada. However, The Yokohama Rubber is 1.13 times less risky than Franco Nevada. It trades about 0.09 of its potential returns per unit of risk. Franco Nevada is currently generating about 0.03 per unit of risk. If you would invest  1,850  in The Yokohama Rubber on October 24, 2024 and sell it today you would earn a total of  150.00  from holding The Yokohama Rubber or generate 8.11% return on investment over 90 days.

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

The Yokohama Rubber  vs.  Franco Nevada

Yokohama Rubber

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Yokohama Rubber may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Franco Nevada

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Franco Nevada are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Franco Nevada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Yokohama Rubber and Franco Nevada

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

The idea behind The Yokohama Rubber and Franco Nevada 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.