Correlation Between NYSE Composite and MITSUBISHI

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Apply Can any of the company-specific risk be diversified away by investing in both NYSE Composite and MITSUBISHI 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 NYSE Composite and MITSUBISHI into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for NYSE Composite and MITSUBISHI

Pair Corralation between NYSE Composite and MITSUBISHI

NYSE Composite  vs.  MITSUBISHI UFJ FINL

Pair Trading with NYSE Composite and MITSUBISHI

The main advantage of trading using opposite NYSE Composite and MITSUBISHI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, MITSUBISHI 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 will offset losses from the drop in MITSUBISHI's long position.The idea behind NYSE Composite and MITSUBISHI UFJ FINL 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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