Correlation Between MITSUBISHI STEEL and Deutsche Lufthansa

Can any of the company-specific risk be diversified away by investing in both MITSUBISHI STEEL and Deutsche Lufthansa 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 Deutsche Lufthansa 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 Deutsche Lufthansa AG, you can compare the effects of market volatilities on MITSUBISHI STEEL and Deutsche Lufthansa 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 Deutsche Lufthansa. Check out your portfolio center. Please also check ongoing floating volatility patterns of MITSUBISHI STEEL and Deutsche Lufthansa.

Diversification Opportunities for MITSUBISHI STEEL and Deutsche Lufthansa

-0.15

Correlation Coefficient

MITSUBISHI STEEL  Deutsche Lufthansa

Good diversification

The 3 months correlation between MITSUBISHI and Deutsche is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding MITSUBISHI STEEL MFG and Deutsche Lufthansa AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Lufthansa 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 Deutsche Lufthansa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Lufthansa has no effect on the direction of MITSUBISHI STEEL i.e., MITSUBISHI STEEL and Deutsche Lufthansa go up and down completely randomly.

Pair Corralation between MITSUBISHI STEEL and Deutsche Lufthansa

Assuming the 90 days horizon MITSUBISHI STEEL MFG is expected to generate 1.24 times more return on investment than Deutsche Lufthansa. However, MITSUBISHI STEEL is 1.24 times more volatile than Deutsche Lufthansa AG. It trades about 0.03 of its potential returns per unit of risk. Deutsche Lufthansa AG is currently generating about -0.02 per unit of risk. If you would invest  711.00  in MITSUBISHI STEEL MFG on October 2, 2024 and sell it today you would earn a total of  214.00  from holding MITSUBISHI STEEL MFG or generate 30.1% return on investment over 90 days.

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

MITSUBISHI STEEL MFG  vs.  Deutsche Lufthansa AG

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MITSUBISHI STEEL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deutsche Lufthansa

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Lufthansa AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Deutsche Lufthansa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MITSUBISHI STEEL and Deutsche Lufthansa

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

The idea behind MITSUBISHI STEEL MFG and Deutsche Lufthansa AG 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.