Correlation Between Industrias Penoles and Mitsubishi Materials

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

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

Diversification Opportunities for Industrias Penoles and Mitsubishi Materials

-0.23

Correlation Coefficient

Industrias Penoles  Mitsubishi Materials

Very good diversification

The 3 months correlation between Industrias and Mitsubishi is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Industrias Penoles Sab and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials and Industrias Penoles 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 Industrias Penoles Sab 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 Industrias Penoles i.e., Industrias Penoles and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between Industrias Penoles and Mitsubishi Materials

Assuming the 90 days horizon Industrias Penoles Sab is expected to generate 1.85 times more return on investment than Mitsubishi Materials. However, Industrias Penoles is 1.85 times more volatile than Mitsubishi Materials. It trades about -0.01 of its potential returns per unit of risk. Mitsubishi Materials is currently generating about -0.07 per unit of risk. If you would invest  1,700  in Industrias Penoles Sab on October 12, 2024 and sell it today you would lose (300.00) from holding Industrias Penoles Sab or give up 17.65% of portfolio value over 90 days.

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

Industrias Penoles Sab  vs.  Mitsubishi Materials

Industrias Penoles Sab

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Penoles Sab are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Industrias Penoles reported 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 latest uncertain performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Industrias Penoles and Mitsubishi Materials

The main advantage of trading using opposite Industrias Penoles and Mitsubishi Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrias Penoles 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 Industrias Penoles Sab 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 Commodity Directory module to find actively traded commodities issued by global exchanges.