Correlation Between USWE SPORTS and Mitsubishi Materials

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

By analyzing existing cross correlation between USWE SPORTS AB and Mitsubishi Materials, you can compare the effects of market volatilities on USWE SPORTS and Mitsubishi Materials 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 USWE SPORTS with a short position of Mitsubishi Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of USWE SPORTS and Mitsubishi Materials.

Diversification Opportunities for USWE SPORTS and Mitsubishi Materials

-0.67

Correlation Coefficient

USWE SPORTS  Mitsubishi Materials

Excellent diversification

The 3 months correlation between USWE and Mitsubishi is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding USWE SPORTS AB and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials and USWE SPORTS 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 USWE SPORTS AB are associated (or correlated) with Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of USWE SPORTS i.e., USWE SPORTS and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between USWE SPORTS and Mitsubishi Materials

Assuming the 90 days horizon USWE SPORTS AB is expected to generate 1.6 times more return on investment than Mitsubishi Materials. However, USWE SPORTS is 1.6 times more volatile than Mitsubishi Materials. It trades about -0.09 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about -0.27 per unit of risk. If you would invest  76.00  in USWE SPORTS AB on September 27, 2024 and sell it today you would lose (3.00) from holding USWE SPORTS AB or give up 3.95% of portfolio value over 90 days.

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

USWE SPORTS AB  vs.  Mitsubishi Materials

USWE SPORTS AB

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward-looking indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with USWE SPORTS and Mitsubishi Materials

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

The idea behind USWE SPORTS AB and Mitsubishi Materials 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.