Correlation Between Rohm Co and Renesas Electronics

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

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

Diversification Opportunities for Rohm Co and Renesas Electronics

0.58

Correlation Coefficient

Rohm Co  Renesas Electronics

Very weak diversification

The 3 months correlation between Rohm and Renesas is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Rohm Co Ltd and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics and Rohm Co 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 Rohm Co Ltd 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 Rohm Co i.e., Rohm Co and Renesas Electronics go up and down completely randomly.

Pair Corralation between Rohm Co and Renesas Electronics

Assuming the 90 days horizon Rohm Co Ltd is expected to under-perform the Renesas Electronics. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rohm Co Ltd is 2.89 times less risky than Renesas Electronics. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Renesas Electronics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,695  in Renesas Electronics on September 3, 2024 and sell it today you would lose (345.00) from holding Renesas Electronics or give up 20.35% of portfolio value over 90 days.

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

Rohm Co Ltd  vs.  Renesas Electronics

Rohm Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rohm Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental 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.

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 fragile 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 Rohm Co and Renesas Electronics

The main advantage of trading using opposite Rohm Co and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rohm Co 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 Rohm Co Ltd 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.