Correlation Between 3M and Mitsubishi Corp
Can any of the company-specific risk be diversified away by investing in both 3M and Mitsubishi Corp 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 3M and Mitsubishi Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 3M Company and Mitsubishi Corp, you can compare the effects of market volatilities on 3M and Mitsubishi Corp 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 3M with a short position of Mitsubishi Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Mitsubishi Corp.
Diversification Opportunities for 3M and Mitsubishi Corp
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 3M and Mitsubishi is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Mitsubishi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Corp and 3M 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 3M Company are associated (or correlated) with Mitsubishi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Corp has no effect on the direction of 3M i.e., 3M and Mitsubishi Corp go up and down completely randomly.
Pair Corralation between 3M and Mitsubishi Corp
Considering the 90-day investment horizon 3M Company is expected to under-perform the Mitsubishi Corp. But the stock apears to be less risky and, when comparing its historical volatility, 3M Company is 1.87 times less risky than Mitsubishi Corp. The stock trades about -0.12 of its potential returns per unit of risk. The Mitsubishi Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,620 in Mitsubishi Corp on November 27, 2024 and sell it today you would earn a total of 5.00 from holding Mitsubishi Corp or generate 0.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
3M Company vs. Mitsubishi Corp
Performance |
| Timeline |
| 3M Company |
| Mitsubishi Corp |
3M and Mitsubishi Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 3M and Mitsubishi Corp
The main advantage of trading using opposite 3M and Mitsubishi Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M position performs unexpectedly, Mitsubishi Corp 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 Corp will offset losses from the drop in Mitsubishi Corp's long position.| 3M vs. MDU Resources Group | 3M vs. Valmont Industries | 3M vs. Griffon | 3M vs. Compass Diversified Holdings |
| Mitsubishi Corp vs. Marubeni Corp ADR | Mitsubishi Corp vs. Itochu Corp ADR | Mitsubishi Corp vs. Marubeni | Mitsubishi Corp vs. Sumitomo Corp ADR |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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