Correlation Between GSK Plc and Mitsubishi UFJ
Can any of the company-specific risk be diversified away by investing in both GSK Plc 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 GSK Plc and Mitsubishi UFJ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GSK plc and Mitsubishi UFJ Financial, you can compare the effects of market volatilities on GSK Plc 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 GSK Plc with a short position of Mitsubishi UFJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSK Plc and Mitsubishi UFJ.
Diversification Opportunities for GSK Plc and Mitsubishi UFJ
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GSK and Mitsubishi is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding GSK plc 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 GSK Plc 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 GSK plc 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 GSK Plc i.e., GSK Plc and Mitsubishi UFJ go up and down completely randomly.
Pair Corralation between GSK Plc and Mitsubishi UFJ
Assuming the 90 days trading horizon GSK Plc is expected to generate 2.62 times less return on investment than Mitsubishi UFJ. But when comparing it to its historical volatility, GSK plc is 1.14 times less risky than Mitsubishi UFJ. It trades about 0.06 of its potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,052 in Mitsubishi UFJ Financial on September 12, 2024 and sell it today you would earn a total of 3,186 from holding Mitsubishi UFJ Financial or generate 78.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.49% |
| Values | Daily Returns |
GSK plc vs. Mitsubishi UFJ Financial
Performance |
| Timeline |
| GSK plc |
| Mitsubishi UFJ Financial |
GSK Plc and Mitsubishi UFJ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GSK Plc and Mitsubishi UFJ
The main advantage of trading using opposite GSK Plc and Mitsubishi UFJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSK Plc 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.| GSK Plc vs. Mitsubishi UFJ Financial | GSK Plc vs. Ameriprise Financial | GSK Plc vs. Lloyds Banking Group | GSK Plc vs. Waste Management |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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