Correlation Between Yancoal Australia and Renesas Electronics

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

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

Diversification Opportunities for Yancoal Australia and Renesas Electronics

-0.41

Correlation Coefficient

Yancoal Australia  Renesas Electronics

Very good diversification

The 3 months correlation between Yancoal and Renesas is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Yancoal Australia and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics and Yancoal Australia 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 Yancoal Australia 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 Yancoal Australia i.e., Yancoal Australia and Renesas Electronics go up and down completely randomly.

Pair Corralation between Yancoal Australia and Renesas Electronics

Assuming the 90 days horizon Yancoal Australia is expected to generate 1.1 times more return on investment than Renesas Electronics. However, Yancoal Australia is 1.1 times more volatile than Renesas Electronics. It trades about 0.04 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.04 per unit of risk. If you would invest  266.00  in Yancoal Australia on September 28, 2024 and sell it today you would earn a total of  119.00  from holding Yancoal Australia or generate 44.74% return on investment over 90 days.

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

Yancoal Australia  vs.  Renesas Electronics

Yancoal Australia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yancoal Australia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Yancoal Australia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 nearly stable basic indicators, Renesas Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Yancoal Australia and Renesas Electronics

The main advantage of trading using opposite Yancoal Australia and Renesas Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yancoal Australia 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 Yancoal Australia 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.