Correlation Between Mitsubishi Electric and Samsung SDI

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

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

Diversification Opportunities for Mitsubishi Electric and Samsung SDI

-0.73

Correlation Coefficient

Mitsubishi Electric  Samsung SDI

Pay attention - limited upside

The 3 months correlation between Mitsubishi and Samsung is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric and Samsung SDI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung SDI and Mitsubishi Electric 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 Electric are associated (or correlated) with Samsung SDI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung SDI has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and Samsung SDI go up and down completely randomly.

Pair Corralation between Mitsubishi Electric and Samsung SDI

Assuming the 90 days trading horizon Mitsubishi Electric is expected to generate 0.77 times more return on investment than Samsung SDI. However, Mitsubishi Electric is 1.3 times less risky than Samsung SDI. It trades about 0.06 of its potential returns per unit of risk. Samsung SDI Co is currently generating about -0.15 per unit of risk. If you would invest  1,481  in Mitsubishi Electric on September 4, 2024 and sell it today you would earn a total of  118.00  from holding Mitsubishi Electric or generate 7.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Mitsubishi Electric  vs.  Samsung SDI Co

Mitsubishi Electric

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Mitsubishi Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Samsung SDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung SDI Co 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 fundamental 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.

Pair Trading with Mitsubishi Electric and Samsung SDI

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

The idea behind Mitsubishi Electric and Samsung SDI Co 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.