Correlation Between Mitsubishi Materials and COSTCO WHOLESALE

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

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

Diversification Opportunities for Mitsubishi Materials and COSTCO WHOLESALE

-0.5

Correlation Coefficient

Mitsubishi Materials  COSTCO WHOLESALE

Very good diversification

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

Pair Corralation between Mitsubishi Materials and COSTCO WHOLESALE

Assuming the 90 days trading horizon Mitsubishi Materials is expected to under-perform the COSTCO WHOLESALE. But the stock apears to be less risky and, when comparing its historical volatility, Mitsubishi Materials is 1.22 times less risky than COSTCO WHOLESALE. The stock trades about -0.01 of its potential returns per unit of risk. The COSTCO WHOLESALE CDR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,774  in COSTCO WHOLESALE CDR on September 15, 2024 and sell it today you would earn a total of  326.00  from holding COSTCO WHOLESALE CDR or generate 11.75% return on investment over 90 days.

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

Mitsubishi Materials  vs.  COSTCO WHOLESALE CDR

Mitsubishi Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Mitsubishi Materials is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COSTCO WHOLESALE CDR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, COSTCO WHOLESALE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mitsubishi Materials and COSTCO WHOLESALE

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

The idea behind Mitsubishi Materials and COSTCO WHOLESALE CDR 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.