Correlation Between Yokohama Rubber and Microsoft

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

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

Diversification Opportunities for Yokohama Rubber and Microsoft

-0.13

Correlation Coefficient

Yokohama Rubber  Microsoft

Good diversification

The 3 months correlation between Yokohama and Microsoft is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Yokohama Rubber and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and Yokohama Rubber 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 The Yokohama Rubber are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Yokohama Rubber i.e., Yokohama Rubber and Microsoft go up and down completely randomly.

Pair Corralation between Yokohama Rubber and Microsoft

Assuming the 90 days trading horizon Yokohama Rubber is expected to generate 7.1 times less return on investment than Microsoft. In addition to that, Yokohama Rubber is 1.06 times more volatile than Microsoft. It trades about 0.02 of its total potential returns per unit of risk. Microsoft is currently generating about 0.14 per unit of volatility. If you would invest  38,673  in Microsoft on September 14, 2024 and sell it today you would earn a total of  4,857  from holding Microsoft or generate 12.56% return on investment over 90 days.

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

The Yokohama Rubber  vs.  Microsoft

Yokohama Rubber

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Yokohama Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Microsoft

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Yokohama Rubber and Microsoft

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

The idea behind The Yokohama Rubber and Microsoft 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.