Correlation Between Mazda and Subaru Corp

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

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

Diversification Opportunities for Mazda and Subaru Corp

0.52

Correlation Coefficient

Mazda  Subaru Corp

Very weak diversification

The 3 months correlation between Mazda and Subaru is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor and Subaru Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subaru Corp and Mazda 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 Mazda Motor are associated (or correlated) with Subaru Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subaru Corp has no effect on the direction of Mazda i.e., Mazda and Subaru Corp go up and down completely randomly.

Pair Corralation between Mazda and Subaru Corp

Assuming the 90 days horizon Mazda Motor is expected to under-perform the Subaru Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mazda Motor is 1.45 times less risky than Subaru Corp. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Subaru Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,738  in Subaru Corp on September 16, 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

Mazda Motor  vs.  Subaru Corp

Mazda Motor

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Mazda and Subaru Corp

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

The idea behind Mazda Motor and Subaru 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.