Correlation Between Mitsubishi Materials and COMMERCIAL VEHICLE

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

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

Diversification Opportunities for Mitsubishi Materials and COMMERCIAL VEHICLE

0.56

Correlation Coefficient

Mitsubishi Materials  COMMERCIAL VEHICLE

Very weak diversification

The 3 months correlation between Mitsubishi and COMMERCIAL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Materials and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of Mitsubishi Materials i.e., Mitsubishi Materials and COMMERCIAL VEHICLE go up and down completely randomly.

Pair Corralation between Mitsubishi Materials and COMMERCIAL VEHICLE

Assuming the 90 days trading horizon Mitsubishi Materials is expected to generate 0.26 times more return on investment than COMMERCIAL VEHICLE. However, Mitsubishi Materials is 3.8 times less risky than COMMERCIAL VEHICLE. It trades about -0.09 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.08 per unit of risk. If you would invest  1,610  in Mitsubishi Materials on September 4, 2024 and sell it today you would lose (90.00) from holding Mitsubishi Materials or give up 5.59% of portfolio value over 90 days.

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

Mitsubishi Materials  vs.  COMMERCIAL VEHICLE

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Mitsubishi Materials and COMMERCIAL VEHICLE

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

The idea behind Mitsubishi Materials and COMMERCIAL VEHICLE 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.