Correlation Between Mitsubishi Corp and World Oil
Can any of the company-specific risk be diversified away by investing in both Mitsubishi Corp and World Oil 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 Corp and World Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi Corp and World Oil Group, you can compare the effects of market volatilities on Mitsubishi Corp and World Oil 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 Corp with a short position of World Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Corp and World Oil.
Diversification Opportunities for Mitsubishi Corp and World Oil
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Mitsubishi and World is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Corp and World Oil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Oil Group and Mitsubishi Corp 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 Corp are associated (or correlated) with World Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Oil Group has no effect on the direction of Mitsubishi Corp i.e., Mitsubishi Corp and World Oil go up and down completely randomly.
Pair Corralation between Mitsubishi Corp and World Oil
Assuming the 90 days horizon Mitsubishi Corp is expected to generate 5.29 times less return on investment than World Oil. But when comparing it to its historical volatility, Mitsubishi Corp is 5.56 times less risky than World Oil. It trades about 0.06 of its potential returns per unit of risk. World Oil Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1.46 in World Oil Group on August 26, 2024 and sell it today you would earn a total of 0.68 from holding World Oil Group or generate 46.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsubishi Corp vs. World Oil Group
Performance |
| Timeline |
| Mitsubishi Corp |
| World Oil Group |
Mitsubishi Corp and World Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsubishi Corp and World Oil
The main advantage of trading using opposite Mitsubishi Corp and World Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Corp position performs unexpectedly, World Oil 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 World Oil will offset losses from the drop in World Oil's long position.| 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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