Correlation Between CHINA VANKE and Mitsubishi Estate

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

By analyzing existing cross correlation between CHINA VANKE TD and Mitsubishi Estate Co, you can compare the effects of market volatilities on CHINA VANKE and Mitsubishi Estate 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 CHINA VANKE with a short position of Mitsubishi Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA VANKE and Mitsubishi Estate.

Diversification Opportunities for CHINA VANKE and Mitsubishi Estate

0.32

Correlation Coefficient

CHINA VANKE  Mitsubishi Estate

Weak diversification

The 3 months correlation between CHINA and Mitsubishi is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CHINA VANKE TD and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate and CHINA VANKE 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 CHINA VANKE TD are associated (or correlated) with Mitsubishi Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Estate has no effect on the direction of CHINA VANKE i.e., CHINA VANKE and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between CHINA VANKE and Mitsubishi Estate

Assuming the 90 days horizon CHINA VANKE TD is expected to generate 4.9 times more return on investment than Mitsubishi Estate. However, CHINA VANKE is 4.9 times more volatile than Mitsubishi Estate Co. It trades about 0.01 of its potential returns per unit of risk. Mitsubishi Estate Co is currently generating about 0.02 per unit of risk. If you would invest  181.00  in CHINA VANKE TD on September 24, 2024 and sell it today you would lose (114.00) from holding CHINA VANKE TD or give up 62.98% of portfolio value over 90 days.

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

CHINA VANKE TD  vs.  Mitsubishi Estate Co

CHINA VANKE TD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA VANKE TD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA VANKE reported solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Estate Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CHINA VANKE and Mitsubishi Estate

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

The idea behind CHINA VANKE TD and Mitsubishi Estate Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.