Correlation Between BlackRock and Mitsubishi Materials

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

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

Diversification Opportunities for BlackRock and Mitsubishi Materials

-0.46

Correlation Coefficient

BlackRock  Mitsubishi Materials

Very good diversification

The 3 months correlation between BlackRock and Mitsubishi is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials and BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between BlackRock and Mitsubishi Materials

Assuming the 90 days trading horizon BlackRock is expected to generate 0.94 times more return on investment than Mitsubishi Materials. However, BlackRock is 1.07 times less risky than Mitsubishi Materials. It trades about 0.26 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about -0.06 per unit of risk. If you would invest  79,567  in BlackRock on September 3, 2024 and sell it today you would earn a total of  18,083  from holding BlackRock or generate 22.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

BlackRock  vs.  Mitsubishi Materials

BlackRock

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, BlackRock 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 rather sound forward-looking indicators, Mitsubishi Materials is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BlackRock and Mitsubishi Materials

The main advantage of trading using opposite BlackRock and Mitsubishi Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.