Correlation Between Yokohama Rubber and China Reinsurance

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

Diversification Opportunities for Yokohama Rubber and China Reinsurance

-0.11

Correlation Coefficient

Yokohama Rubber  China Reinsurance

Good diversification

The 3 months correlation between Yokohama and China is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding The Yokohama Rubber and China Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Reinsurance Corp 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 China Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Reinsurance Corp has no effect on the direction of Yokohama Rubber i.e., Yokohama Rubber and China Reinsurance go up and down completely randomly.

Pair Corralation between Yokohama Rubber and China Reinsurance

Assuming the 90 days trading horizon The Yokohama Rubber is expected to generate 0.48 times more return on investment than China Reinsurance. However, The Yokohama Rubber is 2.08 times less risky than China Reinsurance. It trades about 0.26 of its potential returns per unit of risk. China Reinsurance Corp is currently generating about -0.17 per unit of risk. If you would invest  1,960  in The Yokohama Rubber on October 9, 2024 and sell it today you would earn a total of  100.00  from holding The Yokohama Rubber or generate 5.1% return on investment over 90 days.

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

The Yokohama Rubber  vs.  China Reinsurance Corp

Yokohama Rubber

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 5 (%) 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 February 2025.

China Reinsurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Reinsurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Yokohama Rubber and China Reinsurance

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

The idea behind The Yokohama Rubber and China Reinsurance Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.