Correlation Between Great Wall and Mitsubishi Motors

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

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

Diversification Opportunities for Great Wall and Mitsubishi Motors

0.41

Correlation Coefficient

Great Wall  Mitsubishi Motors

Very weak diversification

The 3 months correlation between Great and Mitsubishi is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Motor and Mitsubishi Motors Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Motors Corp and Great Wall 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 Great Wall Motor are associated (or correlated) with Mitsubishi Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Motors Corp has no effect on the direction of Great Wall i.e., Great Wall and Mitsubishi Motors go up and down completely randomly.

Pair Corralation between Great Wall and Mitsubishi Motors

Assuming the 90 days horizon Great Wall Motor is expected to generate 1.43 times more return on investment than Mitsubishi Motors. However, Great Wall is 1.43 times more volatile than Mitsubishi Motors Corp. It trades about 0.1 of its potential returns per unit of risk. Mitsubishi Motors Corp is currently generating about -0.03 per unit of risk. If you would invest  141.00  in Great Wall Motor on September 12, 2024 and sell it today you would earn a total of  41.00  from holding Great Wall Motor or generate 29.08% return on investment over 90 days.

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

Great Wall Motor  vs.  Mitsubishi Motors Corp

Great Wall Motor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Great Wall reported solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi Motors Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Motors Corp 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 Great Wall and Mitsubishi Motors

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

The idea behind Great Wall Motor and Mitsubishi Motors Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.