Correlation Between Mitsubishi Electric and Powerstorm Holdings

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

By analyzing existing cross correlation between Mitsubishi Electric Corp and Powerstorm Holdings, you can compare the effects of market volatilities on Mitsubishi Electric and Powerstorm Holdings 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 Powerstorm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Electric and Powerstorm Holdings.

Diversification Opportunities for Mitsubishi Electric and Powerstorm Holdings

-0.5

Correlation Coefficient

Mitsubishi Electric  Powerstorm Holdings

Very good diversification

The 3 months correlation between Mitsubishi and Powerstorm is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric Corp and Powerstorm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerstorm Holdings 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 Corp are associated (or correlated) with Powerstorm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerstorm Holdings has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and Powerstorm Holdings go up and down completely randomly.

Pair Corralation between Mitsubishi Electric and Powerstorm Holdings

Assuming the 90 days horizon Mitsubishi Electric Corp is expected to generate 0.42 times more return on investment than Powerstorm Holdings. However, Mitsubishi Electric Corp is 2.38 times less risky than Powerstorm Holdings. It trades about 0.03 of its potential returns per unit of risk. Powerstorm Holdings is currently generating about -0.03 per unit of risk. If you would invest  3,142  in Mitsubishi Electric Corp on September 22, 2024 and sell it today you would earn a total of  199.00  from holding Mitsubishi Electric Corp or generate 6.33% return on investment over 90 days.

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

Mitsubishi Electric Corp  vs.  Powerstorm Holdings

Mitsubishi Electric Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Mitsubishi Electric is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Powerstorm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerstorm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Mitsubishi Electric and Powerstorm Holdings

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

The idea behind Mitsubishi Electric Corp and Powerstorm Holdings 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.