Correlation Between SHIN ETSU and Mitsubishi Electric
Can any of the company-specific risk be diversified away by investing in both SHIN ETSU and Mitsubishi Electric 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 SHIN ETSU and Mitsubishi Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SHIN ETSU CHEMICAL and Mitsubishi Electric, you can compare the effects of market volatilities on SHIN ETSU and Mitsubishi Electric 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 SHIN ETSU with a short position of Mitsubishi Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN ETSU and Mitsubishi Electric.
Diversification Opportunities for SHIN ETSU and Mitsubishi Electric
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SHIN and Mitsubishi is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric and SHIN ETSU 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 SHIN ETSU CHEMICAL are associated (or correlated) with Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and Mitsubishi Electric go up and down completely randomly.
Pair Corralation between SHIN ETSU and Mitsubishi Electric
Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to under-perform the Mitsubishi Electric. But the stock apears to be less risky and, when comparing its historical volatility, SHIN ETSU CHEMICAL is 1.45 times less risky than Mitsubishi Electric. The stock trades about -0.03 of its potential returns per unit of risk. The Mitsubishi Electric is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,481 in Mitsubishi Electric on September 4, 2024 and sell it today you would earn a total of 118.00 from holding Mitsubishi Electric or generate 7.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SHIN ETSU CHEMICAL vs. Mitsubishi Electric
Performance |
| Timeline |
| SHIN ETSU CHEMICAL |
| Mitsubishi Electric |
SHIN ETSU and Mitsubishi Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SHIN ETSU and Mitsubishi Electric
The main advantage of trading using opposite SHIN ETSU and Mitsubishi Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN ETSU position performs unexpectedly, Mitsubishi Electric 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 Electric will offset losses from the drop in Mitsubishi Electric's long position.The idea behind SHIN ETSU CHEMICAL and Mitsubishi Electric 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.| Mitsubishi Electric vs. Mitsubishi Gas Chemical | Mitsubishi Electric vs. SHIN ETSU CHEMICAL | Mitsubishi Electric vs. China BlueChemical | Mitsubishi Electric vs. Quaker Chemical |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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