Correlation Between Bank of America and Mitsubishi UFJ
Can any of the company-specific risk be diversified away by investing in both Bank of America and Mitsubishi UFJ 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 Bank of America and Mitsubishi UFJ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Mitsubishi UFJ Financial, you can compare the effects of market volatilities on Bank of America and Mitsubishi UFJ 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 Bank of America with a short position of Mitsubishi UFJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Mitsubishi UFJ.
Diversification Opportunities for Bank of America and Mitsubishi UFJ
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Mitsubishi is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Mitsubishi UFJ Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Financial and Bank of America 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 Bank of America are associated (or correlated) with Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Financial has no effect on the direction of Bank of America i.e., Bank of America and Mitsubishi UFJ go up and down completely randomly.
Pair Corralation between Bank of America and Mitsubishi UFJ
Assuming the 90 days trading horizon Bank of America is expected to under-perform the Mitsubishi UFJ. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bank of America is 2.19 times less risky than Mitsubishi UFJ. The preferred stock trades about -0.14 of its potential returns per unit of risk. The Mitsubishi UFJ Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 995.00 in Mitsubishi UFJ Financial on September 3, 2024 and sell it today you would earn a total of 196.00 from holding Mitsubishi UFJ Financial or generate 19.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Mitsubishi UFJ Financial
Performance |
| Timeline |
| Bank of America |
| Mitsubishi UFJ Financial |
Bank of America and Mitsubishi UFJ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Mitsubishi UFJ
The main advantage of trading using opposite Bank of America and Mitsubishi UFJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Mitsubishi UFJ 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 UFJ will offset losses from the drop in Mitsubishi UFJ's long position.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. JPMorgan Chase Co | Bank of America vs. Bank of America | Bank of America vs. Wells Fargo |
| Mitsubishi UFJ vs. Partner Communications | Mitsubishi UFJ vs. Merck Company | Mitsubishi UFJ vs. Western Midstream Partners | Mitsubishi UFJ vs. Edgewise Therapeutics |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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