Correlation Between Mitsubishi Estate and Sino Land

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

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

Diversification Opportunities for Mitsubishi Estate and Sino Land

-0.86

Correlation Coefficient

Mitsubishi Estate  Sino Land

Pay attention - limited upside

The 3 months correlation between Mitsubishi and Sino is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Estate Co and Sino Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Land and Mitsubishi Estate 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 Estate Co are associated (or correlated) with Sino Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Land has no effect on the direction of Mitsubishi Estate i.e., Mitsubishi Estate and Sino Land go up and down completely randomly.

Pair Corralation between Mitsubishi Estate and Sino Land

Assuming the 90 days horizon Mitsubishi Estate Co is expected to under-perform the Sino Land. But the stock apears to be less risky and, when comparing its historical volatility, Mitsubishi Estate Co is 4.08 times less risky than Sino Land. The stock trades about -0.07 of its potential returns per unit of risk. The Sino Land is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Sino Land on September 16, 2024 and sell it today you would earn a total of  43.00  from holding Sino Land or generate 79.63% return on investment over 90 days.

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

Mitsubishi Estate Co  vs.  Sino Land

Mitsubishi Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Estate 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.

Sino Land

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Land are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sino Land reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi Estate and Sino Land

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

The idea behind Mitsubishi Estate Co and Sino Land 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.