Correlation Between Mitsubishi Electric and ConocoPhillips
Can any of the company-specific risk be diversified away by investing in both Mitsubishi Electric and ConocoPhillips 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 Mitsubishi Electric and ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi Electric and ConocoPhillips, you can compare the effects of market volatilities on Mitsubishi Electric and ConocoPhillips 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 Mitsubishi Electric with a short position of ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Electric and ConocoPhillips.
Diversification Opportunities for Mitsubishi Electric and ConocoPhillips
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mitsubishi and ConocoPhillips is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Mitsubishi Electric 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 Mitsubishi Electric are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and ConocoPhillips go up and down completely randomly.
Pair Corralation between Mitsubishi Electric and ConocoPhillips
Assuming the 90 days trading horizon Mitsubishi Electric is expected to under-perform the ConocoPhillips. But the stock apears to be less risky and, when comparing its historical volatility, Mitsubishi Electric is 1.27 times less risky than ConocoPhillips. The stock trades about -0.07 of its potential returns per unit of risk. The ConocoPhillips is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 9,986 in ConocoPhillips on September 2, 2024 and sell it today you would earn a total of 178.00 from holding ConocoPhillips or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsubishi Electric vs. ConocoPhillips
Performance |
| Timeline |
| Mitsubishi Electric |
| ConocoPhillips |
Mitsubishi Electric and ConocoPhillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsubishi Electric and ConocoPhillips
The main advantage of trading using opposite Mitsubishi Electric and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Electric position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.The idea behind Mitsubishi Electric and ConocoPhillips pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ConocoPhillips vs. CyberArk Software | ConocoPhillips vs. ADRIATIC METALS LS 013355 | ConocoPhillips vs. MCEWEN MINING INC | ConocoPhillips vs. SERI INDUSTRIAL EO |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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