Correlation Between American Express and Mitsubishi Electric
Can any of the company-specific risk be diversified away by investing in both American Express and Mitsubishi Electric 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 American Express and Mitsubishi Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Mitsubishi Electric, you can compare the effects of market volatilities on American Express and Mitsubishi Electric 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 American Express with a short position of Mitsubishi Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Mitsubishi Electric.
Diversification Opportunities for American Express and Mitsubishi Electric
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Mitsubishi is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric and American Express 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 American Express are associated (or correlated) with Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of American Express i.e., American Express and Mitsubishi Electric go up and down completely randomly.
Pair Corralation between American Express and Mitsubishi Electric
Considering the 90-day investment horizon American Express is expected to generate 1.1 times less return on investment than Mitsubishi Electric. But when comparing it to its historical volatility, American Express is 2.51 times less risky than Mitsubishi Electric. It trades about 0.28 of its potential returns per unit of risk. Mitsubishi Electric is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,569 in Mitsubishi Electric on August 28, 2024 and sell it today you would earn a total of 172.00 from holding Mitsubishi Electric or generate 10.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Express vs. Mitsubishi Electric
Performance |
| Timeline |
| American Express |
| Mitsubishi Electric |
American Express and Mitsubishi Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Mitsubishi Electric
The main advantage of trading using opposite American Express and Mitsubishi Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Mitsubishi Electric 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 Electric will offset losses from the drop in Mitsubishi Electric's long position.| American Express vs. Orix Corp Ads | American Express vs. Medallion Financial Corp | American Express vs. Oportun Financial Corp | American Express vs. SLM Corp Pb |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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