Correlation Between Mazda and Isuzu Motors

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

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

Diversification Opportunities for Mazda and Isuzu Motors

0.38

Correlation Coefficient

Mazda  Isuzu Motors

Weak diversification

The 3 months correlation between Mazda and Isuzu is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor Corp and Isuzu Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isuzu Motors 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 Corp are associated (or correlated) with Isuzu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isuzu Motors has no effect on the direction of Mazda i.e., Mazda and Isuzu Motors go up and down completely randomly.

Pair Corralation between Mazda and Isuzu Motors

Assuming the 90 days horizon Mazda Motor Corp is expected to under-perform the Isuzu Motors. In addition to that, Mazda is 1.34 times more volatile than Isuzu Motors. It trades about -0.11 of its total potential returns per unit of risk. Isuzu Motors is currently generating about -0.01 per unit of volatility. If you would invest  1,416  in Isuzu Motors on September 16, 2024 and sell it today you would lose (27.00) from holding Isuzu Motors or give up 1.91% of portfolio value over 90 days.

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

Mazda Motor Corp  vs.  Isuzu Motors

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.

Isuzu Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Isuzu Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Isuzu Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mazda and Isuzu Motors

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

The idea behind Mazda Motor Corp and Isuzu Motors 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.