Correlation Between MITSUBISHI STEEL and Air Lease

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

By analyzing existing cross correlation between MITSUBISHI STEEL MFG and Air Lease, you can compare the effects of market volatilities on MITSUBISHI STEEL and Air Lease 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 STEEL with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of MITSUBISHI STEEL and Air Lease.

Diversification Opportunities for MITSUBISHI STEEL and Air Lease

0.4

Correlation Coefficient

MITSUBISHI STEEL  Air Lease

Very weak diversification

The 3 months correlation between MITSUBISHI and Air is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding MITSUBISHI STEEL MFG and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and MITSUBISHI STEEL 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 STEEL MFG are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of MITSUBISHI STEEL i.e., MITSUBISHI STEEL and Air Lease go up and down completely randomly.

Pair Corralation between MITSUBISHI STEEL and Air Lease

Assuming the 90 days horizon MITSUBISHI STEEL MFG is expected to generate 0.67 times more return on investment than Air Lease. However, MITSUBISHI STEEL MFG is 1.49 times less risky than Air Lease. It trades about 0.3 of its potential returns per unit of risk. Air Lease is currently generating about 0.12 per unit of risk. If you would invest  810.00  in MITSUBISHI STEEL MFG on September 19, 2024 and sell it today you would earn a total of  55.00  from holding MITSUBISHI STEEL MFG or generate 6.79% return on investment over 90 days.

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

MITSUBISHI STEEL MFG  vs.  Air Lease

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MITSUBISHI STEEL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Lease

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Air Lease reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MITSUBISHI STEEL and Air Lease

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

The idea behind MITSUBISHI STEEL MFG and Air Lease 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.