Correlation Between MITSUBISHI STEEL and Tianjin Capital

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

By analyzing existing cross correlation between MITSUBISHI STEEL MFG and Tianjin Capital Environmental, you can compare the effects of market volatilities on MITSUBISHI STEEL and Tianjin Capital 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 MITSUBISHI STEEL with a short position of Tianjin Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of MITSUBISHI STEEL and Tianjin Capital.

Diversification Opportunities for MITSUBISHI STEEL and Tianjin Capital

0.0

Correlation Coefficient

MITSUBISHI STEEL  Tianjin Capital

Pay attention - limited upside

The 3 months correlation between MITSUBISHI and Tianjin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding MITSUBISHI STEEL MFG and Tianjin Capital Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Capital Envi and MITSUBISHI STEEL 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 MITSUBISHI STEEL MFG are associated (or correlated) with Tianjin Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Capital Envi has no effect on the direction of MITSUBISHI STEEL i.e., MITSUBISHI STEEL and Tianjin Capital go up and down completely randomly.

Pair Corralation between MITSUBISHI STEEL and Tianjin Capital

Assuming the 90 days horizon MITSUBISHI STEEL is expected to generate 5.05 times less return on investment than Tianjin Capital. But when comparing it to its historical volatility, MITSUBISHI STEEL MFG is 2.76 times less risky than Tianjin Capital. It trades about 0.07 of its potential returns per unit of risk. Tianjin Capital Environmental is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Tianjin Capital Environmental on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Tianjin Capital Environmental or generate 25.81% return on investment over 90 days.

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

MITSUBISHI STEEL MFG  vs.  Tianjin Capital Environmental

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MITSUBISHI STEEL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tianjin Capital Envi

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Capital Environmental are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tianjin Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MITSUBISHI STEEL and Tianjin Capital

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

The idea behind MITSUBISHI STEEL MFG and Tianjin Capital Environmental 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.