Correlation Between China Overseas and Mitsui Fudosan

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

By analyzing existing cross correlation between China Overseas Land and Mitsui Fudosan Co, you can compare the effects of market volatilities on China Overseas and Mitsui Fudosan 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 Overseas with a short position of Mitsui Fudosan. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Overseas and Mitsui Fudosan.

Diversification Opportunities for China Overseas and Mitsui Fudosan

0.31

Correlation Coefficient

China Overseas  Mitsui Fudosan

Weak diversification

The 3 months correlation between China and Mitsui is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Overseas Land and Mitsui Fudosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Fudosan and China Overseas 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 Overseas Land are associated (or correlated) with Mitsui Fudosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Fudosan has no effect on the direction of China Overseas i.e., China Overseas and Mitsui Fudosan go up and down completely randomly.

Pair Corralation between China Overseas and Mitsui Fudosan

Assuming the 90 days horizon China Overseas Land is expected to generate 3.1 times more return on investment than Mitsui Fudosan. However, China Overseas is 3.1 times more volatile than Mitsui Fudosan Co. It trades about 0.06 of its potential returns per unit of risk. Mitsui Fudosan Co is currently generating about -0.1 per unit of risk. If you would invest  134.00  in China Overseas Land on September 23, 2024 and sell it today you would earn a total of  16.00  from holding China Overseas Land or generate 11.94% return on investment over 90 days.

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

China Overseas Land  vs.  Mitsui Fudosan Co

China Overseas Land

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Mitsui Fudosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Fudosan 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 Overseas and Mitsui Fudosan

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

The idea behind China Overseas Land and Mitsui Fudosan 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.