Correlation Between Mitsubishi UFJ and China Aircraft

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

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

Diversification Opportunities for Mitsubishi UFJ and China Aircraft

0.15

Correlation Coefficient

Mitsubishi UFJ  China Aircraft

Average diversification

The 3 months correlation between Mitsubishi and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Lease and China Aircraft Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Aircraft Leasing and Mitsubishi UFJ 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 UFJ Lease are associated (or correlated) with China Aircraft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Aircraft Leasing has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and China Aircraft go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and China Aircraft

Assuming the 90 days horizon Mitsubishi UFJ Lease is expected to under-perform the China Aircraft. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mitsubishi UFJ Lease is 1.5 times less risky than China Aircraft. The pink sheet trades about -0.06 of its potential returns per unit of risk. The China Aircraft Leasing is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  30.00  in China Aircraft Leasing on September 4, 2024 and sell it today you would earn a total of  10.00  from holding China Aircraft Leasing or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Mitsubishi UFJ Lease  vs.  China Aircraft Leasing

Mitsubishi UFJ Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi UFJ Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

China Aircraft Leasing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Aircraft Leasing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, China Aircraft reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi UFJ and China Aircraft

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

The idea behind Mitsubishi UFJ Lease and China Aircraft Leasing 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.