Correlation Between Subaru Corp and Mazda

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

By analyzing existing cross correlation between Subaru Corp and Mazda Motor Corp, you can compare the effects of market volatilities on Subaru Corp and Mazda 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 Subaru Corp with a short position of Mazda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Subaru Corp and Mazda.

Diversification Opportunities for Subaru Corp and Mazda

0.48

Correlation Coefficient

Subaru Corp  Mazda

Very weak diversification

The 3 months correlation between Subaru and Mazda is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Subaru Corp and Mazda Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor Corp and Subaru Corp 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 Subaru Corp are associated (or correlated) with Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor Corp has no effect on the direction of Subaru Corp i.e., Subaru Corp and Mazda go up and down completely randomly.

Pair Corralation between Subaru Corp and Mazda

Assuming the 90 days horizon Subaru Corp is expected to generate 2.14 times more return on investment than Mazda. However, Subaru Corp is 2.14 times more volatile than Mazda Motor Corp. It trades about 0.0 of its potential returns per unit of risk. Mazda Motor Corp is currently generating about -0.11 per unit of risk. If you would invest  1,738  in Subaru Corp on September 15, 2024 and sell it today you would lose (98.00) from holding Subaru Corp or give up 5.64% of portfolio value over 90 days.

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

Subaru Corp  vs.  Mazda Motor Corp

Subaru Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mazda Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mazda Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Subaru Corp and Mazda

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

The idea behind Subaru Corp and Mazda Motor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.