Correlation Between Subaru Corp and Renault SA

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

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

Diversification Opportunities for Subaru Corp and Renault SA

0.07

Correlation Coefficient

Subaru Corp  Renault SA

Significant diversification

The 3 months correlation between Subaru and Renault is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Subaru Corp and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Subaru Corp i.e., Subaru Corp and Renault SA go up and down completely randomly.

Pair Corralation between Subaru Corp and Renault SA

Assuming the 90 days horizon Subaru Corp is expected to generate 138.2 times less return on investment than Renault SA. In addition to that, Subaru Corp is 2.18 times more volatile than Renault SA. It trades about 0.0 of its total potential returns per unit of risk. Renault SA is currently generating about 0.07 per unit of volatility. If you would invest  863.00  in Renault SA on September 15, 2024 and sell it today you would earn a total of  68.00  from holding Renault SA or generate 7.88% return on investment over 90 days.

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

Subaru Corp  vs.  Renault SA

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.

Renault SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Renault SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Subaru Corp and Renault SA

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

The idea behind Subaru Corp and Renault SA 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.