Correlation Between Mitsubishi and Marubeni

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

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

Diversification Opportunities for Mitsubishi and Marubeni

0.67

Correlation Coefficient

Mitsubishi  Marubeni

Poor diversification

The 3 months correlation between Mitsubishi and Marubeni is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi and Marubeni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni and Mitsubishi 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 Mitsubishi are associated (or correlated) with Marubeni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni has no effect on the direction of Mitsubishi i.e., Mitsubishi and Marubeni go up and down completely randomly.

Pair Corralation between Mitsubishi and Marubeni

Assuming the 90 days horizon Mitsubishi is expected to under-perform the Marubeni. In addition to that, Mitsubishi is 1.07 times more volatile than Marubeni. It trades about -0.13 of its total potential returns per unit of risk. Marubeni is currently generating about -0.04 per unit of volatility. If you would invest  1,447  in Marubeni on September 23, 2024 and sell it today you would lose (87.00) from holding Marubeni or give up 6.01% of portfolio value over 90 days.

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

Mitsubishi  vs.  Marubeni

Mitsubishi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Marubeni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marubeni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Marubeni is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsubishi and Marubeni

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

The idea behind Mitsubishi and Marubeni 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.