Correlation Between Marubeni Corp and Mitsubishi Heavy

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

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

Diversification Opportunities for Marubeni Corp and Mitsubishi Heavy

0.02

Correlation Coefficient

Marubeni Corp  Mitsubishi Heavy

Significant diversification

The 3 months correlation between Marubeni and Mitsubishi is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni Corp ADR and Mitsubishi Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Heavy Ind and Marubeni Corp 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 Marubeni Corp ADR are associated (or correlated) with Mitsubishi Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Heavy Ind has no effect on the direction of Marubeni Corp i.e., Marubeni Corp and Mitsubishi Heavy go up and down completely randomly.

Pair Corralation between Marubeni Corp and Mitsubishi Heavy

Assuming the 90 days horizon Marubeni Corp ADR is expected to under-perform the Mitsubishi Heavy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Marubeni Corp ADR is 1.73 times less risky than Mitsubishi Heavy. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Mitsubishi Heavy Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,193  in Mitsubishi Heavy Industries on September 12, 2024 and sell it today you would earn a total of  375.00  from holding Mitsubishi Heavy Industries or generate 31.43% return on investment over 90 days.

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

Marubeni Corp ADR  vs.  Mitsubishi Heavy Industries

Marubeni Corp ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marubeni Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mitsubishi Heavy Ind

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Heavy Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Mitsubishi Heavy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marubeni Corp and Mitsubishi Heavy

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

The idea behind Marubeni Corp ADR and Mitsubishi Heavy Industries 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.