Correlation Between Materialise and Mitsubishi Materials

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

By analyzing existing cross correlation between Materialise NV and Mitsubishi Materials, you can compare the effects of market volatilities on Materialise and Mitsubishi Materials 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 Materialise with a short position of Mitsubishi Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materialise and Mitsubishi Materials.

Diversification Opportunities for Materialise and Mitsubishi Materials

-0.62

Correlation Coefficient

Materialise  Mitsubishi Materials

Excellent diversification

The 3 months correlation between Materialise and Mitsubishi is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials and Materialise 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 Materialise NV are associated (or correlated) with Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of Materialise i.e., Materialise and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between Materialise and Mitsubishi Materials

Assuming the 90 days trading horizon Materialise NV is expected to generate 2.68 times more return on investment than Mitsubishi Materials. However, Materialise is 2.68 times more volatile than Mitsubishi Materials. It trades about 0.18 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about -0.06 per unit of risk. If you would invest  466.00  in Materialise NV on September 3, 2024 and sell it today you would earn a total of  219.00  from holding Materialise NV or generate 47.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Materialise NV  vs.  Mitsubishi Materials

Materialise NV

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Mitsubishi Materials is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Materialise and Mitsubishi Materials

The main advantage of trading using opposite Materialise and Mitsubishi Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materialise position performs unexpectedly, Mitsubishi Materials 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 Materials will offset losses from the drop in Mitsubishi Materials' long position.

The idea behind Materialise NV and Mitsubishi Materials 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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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.