Correlation Between Sumitomo Mitsui and Mitsubishi UFJ
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui 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 Sumitomo Mitsui and Mitsubishi UFJ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Trust and Mitsubishi UFJ Financial, you can compare the effects of market volatilities on Sumitomo Mitsui 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 Sumitomo Mitsui with a short position of Mitsubishi UFJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Mitsubishi UFJ.
Diversification Opportunities for Sumitomo Mitsui and Mitsubishi UFJ
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and Mitsubishi is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Trust 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 Sumitomo Mitsui 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 Sumitomo Mitsui Trust 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 Sumitomo Mitsui i.e., Sumitomo Mitsui and Mitsubishi UFJ go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Mitsubishi UFJ
Assuming the 90 days horizon Sumitomo Mitsui Trust is expected to under-perform the Mitsubishi UFJ. In addition to that, Sumitomo Mitsui is 1.35 times more volatile than Mitsubishi UFJ Financial. It trades about -0.01 of its total potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.09 per unit of volatility. If you would invest 1,150 in Mitsubishi UFJ Financial on October 21, 2024 and sell it today you would earn a total of 50.00 from holding Mitsubishi UFJ Financial or generate 4.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Trust vs. Mitsubishi UFJ Financial
Performance |
| Timeline |
| Sumitomo Mitsui Trust |
| Mitsubishi UFJ Financial |
Sumitomo Mitsui and Mitsubishi UFJ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Mitsubishi UFJ
The main advantage of trading using opposite Sumitomo Mitsui and Mitsubishi UFJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui 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.| Sumitomo Mitsui vs. Mitsubishi UFJ Financial | Sumitomo Mitsui vs. Erste Group Bank | Sumitomo Mitsui vs. ITOCHU | Sumitomo Mitsui vs. Sumitomo Mitsui Trust |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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