Correlation Between Adidas AG and Mitsubishi Materials
Can any of the company-specific risk be diversified away by investing in both Adidas AG and Mitsubishi Materials 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 Adidas AG and Mitsubishi Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between adidas AG and Mitsubishi Materials, you can compare the effects of market volatilities on Adidas AG and Mitsubishi Materials 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 Adidas AG with a short position of Mitsubishi Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adidas AG and Mitsubishi Materials.
Diversification Opportunities for Adidas AG and Mitsubishi Materials
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adidas and Mitsubishi is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding adidas AG and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials and Adidas AG 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 adidas AG are associated (or correlated) with Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of Adidas AG i.e., Adidas AG and Mitsubishi Materials go up and down completely randomly.
Pair Corralation between Adidas AG and Mitsubishi Materials
Assuming the 90 days trading horizon adidas AG is expected to generate 0.98 times more return on investment than Mitsubishi Materials. However, adidas AG is 1.02 times less risky than Mitsubishi Materials. It trades about 0.05 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about 0.01 per unit of risk. If you would invest 9,767 in adidas AG on September 4, 2024 and sell it today you would earn a total of 1,833 from holding adidas AG or generate 18.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
adidas AG vs. Mitsubishi Materials
Performance |
| Timeline |
| adidas AG |
| Mitsubishi Materials |
Adidas AG and Mitsubishi Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adidas AG and Mitsubishi Materials
The main advantage of trading using opposite Adidas AG and Mitsubishi Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adidas AG position performs unexpectedly, Mitsubishi Materials 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 Mitsubishi Materials will offset losses from the drop in Mitsubishi Materials' long position.| Adidas AG vs. Mitsubishi Materials | Adidas AG vs. APPLIED MATERIALS | Adidas AG vs. Vastned Retail NV | Adidas AG vs. NEWELL RUBBERMAID |
| Mitsubishi Materials vs. TOTAL GABON | Mitsubishi Materials vs. Walgreens Boots Alliance | Mitsubishi Materials vs. Peak Resources Limited |
Check out your portfolio center.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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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