Correlation Between Mazda and Renault SA

Can any of the company-specific risk be diversified away by investing in both Mazda 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 Mazda and Renault SA 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 Renault SA, you can compare the effects of market volatilities on Mazda 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 Mazda with a short position of Renault SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mazda and Renault SA.

Diversification Opportunities for Mazda and Renault SA

-0.17

Correlation Coefficient

Mazda  Renault SA

Good diversification

The 3 months correlation between Mazda and Renault is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor Corp and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 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 Mazda i.e., Mazda and Renault SA go up and down completely randomly.

Pair Corralation between Mazda and Renault SA

Assuming the 90 days horizon Mazda Motor Corp is expected to under-perform the Renault SA. In addition to that, Mazda is 1.02 times more volatile than Renault SA. It trades about -0.11 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 16, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mazda Motor Corp  vs.  Renault SA

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.

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 Mazda and Renault SA

The main advantage of trading using opposite Mazda and Renault SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mazda 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 Mazda Motor 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.