Correlation Between Yokohama Rubber and CENTURIA OFFICE

Can any of the company-specific risk be diversified away by investing in both Yokohama Rubber and CENTURIA OFFICE 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 CENTURIA OFFICE 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 CENTURIA OFFICE REIT, you can compare the effects of market volatilities on Yokohama Rubber and CENTURIA OFFICE 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 CENTURIA OFFICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yokohama Rubber and CENTURIA OFFICE.

Diversification Opportunities for Yokohama Rubber and CENTURIA OFFICE

0.4

Correlation Coefficient

Yokohama Rubber  CENTURIA OFFICE

Very weak diversification

The 3 months correlation between Yokohama and CENTURIA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Yokohama Rubber and CENTURIA OFFICE REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTURIA OFFICE REIT 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 CENTURIA OFFICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTURIA OFFICE REIT has no effect on the direction of Yokohama Rubber i.e., Yokohama Rubber and CENTURIA OFFICE go up and down completely randomly.

Pair Corralation between Yokohama Rubber and CENTURIA OFFICE

Assuming the 90 days trading horizon Yokohama Rubber is expected to generate 1.32 times less return on investment than CENTURIA OFFICE. But when comparing it to its historical volatility, The Yokohama Rubber is 1.21 times less risky than CENTURIA OFFICE. It trades about 0.09 of its potential returns per unit of risk. CENTURIA OFFICE REIT is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  58.00  in CENTURIA OFFICE REIT on December 24, 2024 and sell it today you would earn a total of  6.00  from holding CENTURIA OFFICE REIT or generate 10.34% return on investment over 90 days.

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

The Yokohama Rubber  vs.  CENTURIA OFFICE REIT

Yokohama Rubber

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Yokohama Rubber may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CENTURIA OFFICE REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CENTURIA OFFICE REIT are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CENTURIA OFFICE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Yokohama Rubber and CENTURIA OFFICE

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

The idea behind The Yokohama Rubber and CENTURIA OFFICE REIT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.