Correlation Between VARIOUS EATERIES and MITSUBISHI STEEL

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

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

Diversification Opportunities for VARIOUS EATERIES and MITSUBISHI STEEL

-0.59

Correlation Coefficient

VARIOUS EATERIES  MITSUBISHI STEEL

Excellent diversification

The 3 months correlation between VARIOUS and MITSUBISHI is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and MITSUBISHI STEEL MFG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITSUBISHI STEEL MFG and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with MITSUBISHI STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITSUBISHI STEEL MFG has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and MITSUBISHI STEEL go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and MITSUBISHI STEEL

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the MITSUBISHI STEEL. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 1.09 times less risky than MITSUBISHI STEEL. The stock trades about -0.13 of its potential returns per unit of risk. The MITSUBISHI STEEL MFG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  855.00  in MITSUBISHI STEEL MFG on October 6, 2024 and sell it today you would earn a total of  80.00  from holding MITSUBISHI STEEL MFG or generate 9.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

VARIOUS EATERIES LS  vs.  MITSUBISHI STEEL MFG

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 8 (%) 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 February 2025.

Pair Trading with VARIOUS EATERIES and MITSUBISHI STEEL

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

The idea behind VARIOUS EATERIES LS and MITSUBISHI STEEL MFG 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.