Correlation Between Barclays PLC and Mitsubishi UFJ

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

By analyzing existing cross correlation between Barclays PLC ADR and Mitsubishi UFJ Financial, you can compare the effects of market volatilities on Barclays PLC and Mitsubishi UFJ 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 Barclays PLC with a short position of Mitsubishi UFJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays PLC and Mitsubishi UFJ.

Diversification Opportunities for Barclays PLC and Mitsubishi UFJ

0.88

Correlation Coefficient

Barclays PLC  Mitsubishi UFJ

Very poor diversification

The 3 months correlation between Barclays and Mitsubishi is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC ADR and Mitsubishi UFJ Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Financial and Barclays PLC 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 Barclays PLC ADR are associated (or correlated) with Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Financial has no effect on the direction of Barclays PLC i.e., Barclays PLC and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Barclays PLC and Mitsubishi UFJ

Considering the 90-day investment horizon Barclays PLC is expected to generate 1.01 times less return on investment than Mitsubishi UFJ. In addition to that, Barclays PLC is 1.06 times more volatile than Mitsubishi UFJ Financial. It trades about 0.13 of its total potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.13 per unit of volatility. If you would invest  1,030  in Mitsubishi UFJ Financial on September 12, 2024 and sell it today you would earn a total of  158.00  from holding Mitsubishi UFJ Financial or generate 15.34% return on investment over 90 days.

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

Barclays PLC ADR  vs.  Mitsubishi UFJ Financial

Barclays PLC ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Barclays PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Barclays PLC and Mitsubishi UFJ

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

The idea behind Barclays PLC ADR and Mitsubishi UFJ Financial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.