Correlation Between Suntory Beverage and Mitsubishi Electric

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

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

Diversification Opportunities for Suntory Beverage and Mitsubishi Electric

0.26

Correlation Coefficient

Suntory Beverage  Mitsubishi Electric

Modest diversification

The 3 months correlation between Suntory and Mitsubishi is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Suntory Beverage Food and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric and Suntory Beverage 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 Suntory Beverage Food are associated (or correlated) with Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of Suntory Beverage i.e., Suntory Beverage and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between Suntory Beverage and Mitsubishi Electric

Assuming the 90 days horizon Suntory Beverage Food is expected to under-perform the Mitsubishi Electric. But the stock apears to be less risky and, when comparing its historical volatility, Suntory Beverage Food is 1.53 times less risky than Mitsubishi Electric. The stock trades about -0.01 of its potential returns per unit of risk. The Mitsubishi Electric is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Mitsubishi Electric on December 23, 2024 and sell it today you would earn a total of  130.00  from holding Mitsubishi Electric or generate 8.02% return on investment over 90 days.

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

Suntory Beverage Food  vs.  Mitsubishi Electric

Suntory Beverage Food

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suntory Beverage Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Suntory Beverage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsubishi Electric

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mitsubishi Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Suntory Beverage and Mitsubishi Electric

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

The idea behind Suntory Beverage Food and Mitsubishi Electric 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.