Correlation Between Vestas Wind and Yokogawa Electric

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

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

Diversification Opportunities for Vestas Wind and Yokogawa Electric

0.86

Correlation Coefficient

Vestas Wind  Yokogawa Electric

Very poor diversification

The 3 months correlation between Vestas and Yokogawa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Yokogawa Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokogawa Electric Corp and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Yokogawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokogawa Electric Corp has no effect on the direction of Vestas Wind i.e., Vestas Wind and Yokogawa Electric go up and down completely randomly.

Pair Corralation between Vestas Wind and Yokogawa Electric

Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Yokogawa Electric. In addition to that, Vestas Wind is 1.13 times more volatile than Yokogawa Electric Corp. It trades about -0.04 of its total potential returns per unit of risk. Yokogawa Electric Corp is currently generating about 0.03 per unit of volatility. If you would invest  3,919  in Yokogawa Electric Corp on September 12, 2024 and sell it today you would earn a total of  585.00  from holding Yokogawa Electric Corp or generate 14.93% return on investment over 90 days.

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

Vestas Wind Systems  vs.  Yokogawa Electric Corp

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems 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.

Yokogawa Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yokogawa Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vestas Wind and Yokogawa Electric

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

The idea behind Vestas Wind Systems and Yokogawa Electric 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.