Correlation Between Mitsubishi Materials and Insulet

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

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

Diversification Opportunities for Mitsubishi Materials and Insulet

-0.57

Correlation Coefficient

Mitsubishi Materials  Insulet

Excellent diversification

The 3 months correlation between Mitsubishi and Insulet is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Materials and Insulet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insulet 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 Insulet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insulet has no effect on the direction of Mitsubishi Materials i.e., Mitsubishi Materials and Insulet go up and down completely randomly.

Pair Corralation between Mitsubishi Materials and Insulet

Assuming the 90 days trading horizon Mitsubishi Materials is expected to under-perform the Insulet. But the stock apears to be less risky and, when comparing its historical volatility, Mitsubishi Materials is 1.31 times less risky than Insulet. The stock trades about -0.06 of its potential returns per unit of risk. The Insulet is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  18,155  in Insulet on September 2, 2024 and sell it today you would earn a total of  6,965  from holding Insulet or generate 38.36% 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.  Insulet

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

Insulet

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Insulet are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Insulet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi Materials and Insulet

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

The idea behind Mitsubishi Materials and Insulet 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.