Correlation Between Yokohama Rubber and Japan Real

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

Diversification Opportunities for Yokohama Rubber and Japan Real

0.02

Correlation Coefficient

Yokohama Rubber  Japan Real

Significant diversification

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

Pair Corralation between Yokohama Rubber and Japan Real

Assuming the 90 days trading horizon The Yokohama Rubber is expected to generate 1.32 times more return on investment than Japan Real. However, Yokohama Rubber is 1.32 times more volatile than Japan Real Estate. It trades about 0.03 of its potential returns per unit of risk. Japan Real Estate is currently generating about 0.03 per unit of risk. If you would invest  2,120  in The Yokohama Rubber on December 4, 2024 and sell it today you would earn a total of  20.00  from holding The Yokohama Rubber or generate 0.94% 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.  Japan Real Estate

Yokohama Rubber

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Yokohama Rubber exhibited solid returns over the last few months and may actually be approaching a breakup point.

Japan Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Japan Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Real is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Yokohama Rubber and Japan Real

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

The idea behind The Yokohama Rubber and Japan Real Estate 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.