Correlation Between ABB and Yaskawa Electric

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

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

Diversification Opportunities for ABB and Yaskawa Electric

0.51

Correlation Coefficient

ABB  Yaskawa Electric

Very weak diversification

The 3 months correlation between ABB and Yaskawa is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ABB and Yaskawa Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yaskawa Electric Corp and ABB 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 ABB are associated (or correlated) with Yaskawa Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yaskawa Electric Corp has no effect on the direction of ABB i.e., ABB and Yaskawa Electric go up and down completely randomly.

Pair Corralation between ABB and Yaskawa Electric

Assuming the 90 days horizon ABB is expected to generate 0.76 times more return on investment than Yaskawa Electric. However, ABB is 1.31 times less risky than Yaskawa Electric. It trades about 0.1 of its potential returns per unit of risk. Yaskawa Electric Corp is currently generating about -0.08 per unit of risk. If you would invest  4,667  in ABB on January 24, 2024 and sell it today you would earn a total of  171.00  from holding ABB or generate 3.66% return on investment over 90 days.

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

ABB  vs.  Yaskawa Electric Corp

ABB

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, ABB reported solid returns over the last few months and may actually be approaching a breakup point.

Yaskawa Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yaskawa Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Yaskawa Electric is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ABB and Yaskawa Electric

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

The idea behind ABB and Yaskawa 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.