Correlation Between Yamaha and American Eagle

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

By analyzing existing cross correlation between Yamaha Motor Co and American Eagle Gold, you can compare the effects of market volatilities on Yamaha and American Eagle 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 Yamaha with a short position of American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yamaha and American Eagle.

Diversification Opportunities for Yamaha and American Eagle

-0.47

Correlation Coefficient

Yamaha  American Eagle

Very good diversification

The 3 months correlation between Yamaha and American is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Yamaha Motor Co and American Eagle Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Gold and Yamaha 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 Yamaha Motor Co are associated (or correlated) with American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Gold has no effect on the direction of Yamaha i.e., Yamaha and American Eagle go up and down completely randomly.

Pair Corralation between Yamaha and American Eagle

Assuming the 90 days horizon Yamaha Motor Co is expected to under-perform the American Eagle. But the pink sheet apears to be less risky and, when comparing its historical volatility, Yamaha Motor Co is 3.59 times less risky than American Eagle. The pink sheet trades about -0.04 of its potential returns per unit of risk. The American Eagle Gold is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  30.00  in American Eagle Gold on September 1, 2024 and sell it today you would earn a total of  37.00  from holding American Eagle Gold or generate 123.33% return on investment over 90 days.

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

Yamaha Motor Co  vs.  American Eagle Gold

Yamaha Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Yamaha is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Eagle Gold

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Eagle Gold are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, American Eagle reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yamaha and American Eagle

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

The idea behind Yamaha Motor Co and American Eagle Gold 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.