Correlation Between Mitsubishi Materials and MEITUAN UNSPADR/2B
Can any of the company-specific risk be diversified away by investing in both Mitsubishi Materials and MEITUAN UNSPADR/2B 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 Materials and MEITUAN UNSPADR/2B into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi Materials and MEITUAN UNSPADR2B, you can compare the effects of market volatilities on Mitsubishi Materials and MEITUAN UNSPADR/2B 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 Materials with a short position of MEITUAN UNSPADR/2B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Materials and MEITUAN UNSPADR/2B.
Diversification Opportunities for Mitsubishi Materials and MEITUAN UNSPADR/2B
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mitsubishi and MEITUAN is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Materials and MEITUAN UNSPADR2B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEITUAN UNSPADR/2B and Mitsubishi Materials 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 Materials are associated (or correlated) with MEITUAN UNSPADR/2B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEITUAN UNSPADR/2B has no effect on the direction of Mitsubishi Materials i.e., Mitsubishi Materials and MEITUAN UNSPADR/2B go up and down completely randomly.
Pair Corralation between Mitsubishi Materials and MEITUAN UNSPADR/2B
Assuming the 90 days trading horizon Mitsubishi Materials is expected to under-perform the MEITUAN UNSPADR/2B. But the stock apears to be less risky and, when comparing its historical volatility, Mitsubishi Materials is 2.26 times less risky than MEITUAN UNSPADR/2B. The stock trades about -0.06 of its potential returns per unit of risk. The MEITUAN UNSPADR2B is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,440 in MEITUAN UNSPADR2B on September 1, 2024 and sell it today you would earn a total of 1,640 from holding MEITUAN UNSPADR2B or generate 67.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.24% |
| Values | Daily Returns |
Mitsubishi Materials vs. MEITUAN UNSPADR2B
Performance |
| Timeline |
| Mitsubishi Materials |
| MEITUAN UNSPADR/2B |
Mitsubishi Materials and MEITUAN UNSPADR/2B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsubishi Materials and MEITUAN UNSPADR/2B
The main advantage of trading using opposite Mitsubishi Materials and MEITUAN UNSPADR/2B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Materials position performs unexpectedly, MEITUAN UNSPADR/2B 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 MEITUAN UNSPADR/2B will offset losses from the drop in MEITUAN UNSPADR/2B's long position.The idea behind Mitsubishi Materials and MEITUAN UNSPADR2B 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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