Correlation Between Mitsubishi Electric and Nitto Denko

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Can any of the company-specific risk be diversified away by investing in both Mitsubishi Electric and Nitto Denko 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 Nitto Denko into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi Electric Corp and Nitto Denko Corp, you can compare the effects of market volatilities on Mitsubishi Electric and Nitto Denko 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 Nitto Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Electric and Nitto Denko.

Diversification Opportunities for Mitsubishi Electric and Nitto Denko

MitsubishiNittoDiversified AwayMitsubishiNittoDiversified Away100%
-0.72
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Mitsubishi and Nitto is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric Corp and Nitto Denko Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nitto Denko Corp 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 Corp are associated (or correlated) with Nitto Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nitto Denko Corp has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and Nitto Denko go up and down completely randomly.

Pair Corralation between Mitsubishi Electric and Nitto Denko

Assuming the 90 days horizon Mitsubishi Electric Corp is expected to under-perform the Nitto Denko. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mitsubishi Electric Corp is 1.36 times less risky than Nitto Denko. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Nitto Denko Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,791  in Nitto Denko Corp on November 25, 2024 and sell it today you would earn a total of  159.00  from holding Nitto Denko Corp or generate 8.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Mitsubishi Electric Corp  vs.  Nitto Denko Corp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-505101520
JavaScript chart by amCharts 3.21.15MIELY NDEKY
       Timeline  
Mitsubishi Electric Corp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Mitsubishi Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb303132333435
Nitto Denko Corp 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Nitto Denko Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward-looking signals, Nitto Denko showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb15161718192021

Mitsubishi Electric and Nitto Denko Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.64-1.98-1.31-0.650.01010.611.211.822.43 0.080.100.120.140.16
JavaScript chart by amCharts 3.21.15MIELY NDEKY
       Returns  

Pair Trading with Mitsubishi Electric and Nitto Denko

The main advantage of trading using opposite Mitsubishi Electric and Nitto Denko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Electric position performs unexpectedly, Nitto Denko 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 Nitto Denko will offset losses from the drop in Nitto Denko's long position.
The idea behind Mitsubishi Electric Corp and Nitto Denko Corp 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.
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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