Correlation Between Intchains Group and Renesas Electronics

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

By analyzing existing cross correlation between Intchains Group Limited and Renesas Electronics, you can compare the effects of market volatilities on Intchains Group and Renesas Electronics 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 Intchains Group with a short position of Renesas Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intchains Group and Renesas Electronics.

Diversification Opportunities for Intchains Group and Renesas Electronics

0.44

Correlation Coefficient

Intchains Group  Renesas Electronics

Very weak diversification

The 3 months correlation between Intchains and Renesas is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Intchains Group Limited and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics and Intchains Group 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 Intchains Group Limited are associated (or correlated) with Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of Intchains Group i.e., Intchains Group and Renesas Electronics go up and down completely randomly.

Pair Corralation between Intchains Group and Renesas Electronics

Considering the 90-day investment horizon Intchains Group is expected to generate 1.28 times less return on investment than Renesas Electronics. But when comparing it to its historical volatility, Intchains Group Limited is 1.78 times less risky than Renesas Electronics. It trades about 0.15 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,237  in Renesas Electronics on September 1, 2024 and sell it today you would earn a total of  108.00  from holding Renesas Electronics or generate 8.73% return on investment over 90 days.

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

Intchains Group Limited  vs.  Renesas Electronics

Intchains Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intchains Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Renesas Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renesas Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Intchains Group and Renesas Electronics

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

The idea behind Intchains Group Limited and Renesas Electronics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.