Correlation Between Yokogawa Electric and Nidec

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

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

Diversification Opportunities for Yokogawa Electric and Nidec

0.27

Correlation Coefficient

Yokogawa Electric  Nidec

Modest diversification

The 3 months correlation between Yokogawa and Nidec is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Yokogawa Electric Corp and Nidec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nidec and Yokogawa Electric 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 Yokogawa Electric Corp are associated (or correlated) with Nidec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nidec has no effect on the direction of Yokogawa Electric i.e., Yokogawa Electric and Nidec go up and down completely randomly.

Pair Corralation between Yokogawa Electric and Nidec

Assuming the 90 days horizon Yokogawa Electric Corp is expected to under-perform the Nidec. But the pink sheet apears to be less risky and, when comparing its historical volatility, Yokogawa Electric Corp is 8.64 times less risky than Nidec. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Nidec is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,866  in Nidec on September 5, 2024 and sell it today you would lose (99.00) from holding Nidec or give up 5.31% of portfolio value over 90 days.

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

Yokogawa Electric Corp  vs.  Nidec

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 weak 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.

Nidec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nidec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nidec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Yokogawa Electric and Nidec

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

The idea behind Yokogawa Electric Corp and Nidec 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.