Correlation Between Shanghai Electric and Mitsubishi Heavy
Can any of the company-specific risk be diversified away by investing in both Shanghai Electric and Mitsubishi Heavy 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 Shanghai Electric and Mitsubishi Heavy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shanghai Electric Group and Mitsubishi Heavy Industries, you can compare the effects of market volatilities on Shanghai Electric and Mitsubishi Heavy 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 Shanghai Electric with a short position of Mitsubishi Heavy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Electric and Mitsubishi Heavy.
Diversification Opportunities for Shanghai Electric and Mitsubishi Heavy
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shanghai and Mitsubishi is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Electric Group and Mitsubishi Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Heavy Ind and Shanghai Electric 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 Shanghai Electric Group are associated (or correlated) with Mitsubishi Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Heavy Ind has no effect on the direction of Shanghai Electric i.e., Shanghai Electric and Mitsubishi Heavy go up and down completely randomly.
Pair Corralation between Shanghai Electric and Mitsubishi Heavy
Assuming the 90 days horizon Shanghai Electric Group is expected to generate 0.38 times more return on investment than Mitsubishi Heavy. However, Shanghai Electric Group is 2.6 times less risky than Mitsubishi Heavy. It trades about 0.11 of its potential returns per unit of risk. Mitsubishi Heavy Industries is currently generating about -0.1 per unit of risk. If you would invest 765.00 in Shanghai Electric Group on October 9, 2024 and sell it today you would earn a total of 16.00 from holding Shanghai Electric Group or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Shanghai Electric Group vs. Mitsubishi Heavy Industries
Performance |
| Timeline |
| Shanghai Electric |
| Mitsubishi Heavy Ind |
Shanghai Electric and Mitsubishi Heavy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shanghai Electric and Mitsubishi Heavy
The main advantage of trading using opposite Shanghai Electric and Mitsubishi Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shanghai Electric position performs unexpectedly, Mitsubishi Heavy 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 Heavy will offset losses from the drop in Mitsubishi Heavy's long position.| Shanghai Electric vs. Xinjiang Goldwind Science | Shanghai Electric vs. American Superconductor | Shanghai Electric vs. Cummins |
| Mitsubishi Heavy vs. Kawasaki Heavy Industries | Mitsubishi Heavy vs. Mitsubishi Electric Corp | Mitsubishi Heavy vs. Mitsubishi Corp | Mitsubishi Heavy vs. Marubeni 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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