Correlation Between Mitsui Fudosan and CHINA VANKE

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

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

Diversification Opportunities for Mitsui Fudosan and CHINA VANKE

0.25

Correlation Coefficient

Mitsui Fudosan  CHINA VANKE

Modest diversification

The 3 months correlation between Mitsui and CHINA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Fudosan Co and CHINA VANKE TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA VANKE TD and Mitsui Fudosan 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 Mitsui Fudosan Co are associated (or correlated) with CHINA VANKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA VANKE TD has no effect on the direction of Mitsui Fudosan i.e., Mitsui Fudosan and CHINA VANKE go up and down completely randomly.

Pair Corralation between Mitsui Fudosan and CHINA VANKE

Assuming the 90 days horizon Mitsui Fudosan Co is expected to under-perform the CHINA VANKE. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Fudosan Co is 6.16 times less risky than CHINA VANKE. The stock trades about -0.1 of its potential returns per unit of risk. The CHINA VANKE TD is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  50.00  in CHINA VANKE TD on September 23, 2024 and sell it today you would earn a total of  17.00  from holding CHINA VANKE TD or generate 34.0% return on investment over 90 days.

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

Mitsui Fudosan Co  vs.  CHINA VANKE TD

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.

CHINA VANKE TD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA VANKE TD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA VANKE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Fudosan and CHINA VANKE

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

The idea behind Mitsui Fudosan Co and CHINA VANKE TD 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.