Correlation Between FIRST SAVINGS and MITSUBISHI STEEL

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

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

Diversification Opportunities for FIRST SAVINGS and MITSUBISHI STEEL

0.22

Correlation Coefficient

FIRST SAVINGS  MITSUBISHI STEEL

Modest diversification

The 3 months correlation between FIRST and MITSUBISHI is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding FIRST SAVINGS FINL 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 FIRST SAVINGS 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 FIRST SAVINGS FINL 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 FIRST SAVINGS i.e., FIRST SAVINGS and MITSUBISHI STEEL go up and down completely randomly.

Pair Corralation between FIRST SAVINGS and MITSUBISHI STEEL

Assuming the 90 days horizon FIRST SAVINGS FINL is expected to generate 1.2 times more return on investment than MITSUBISHI STEEL. However, FIRST SAVINGS is 1.2 times more volatile than MITSUBISHI STEEL MFG. It trades about 0.14 of its potential returns per unit of risk. MITSUBISHI STEEL MFG is currently generating about 0.07 per unit of risk. If you would invest  1,434  in FIRST SAVINGS FINL on October 9, 2024 and sell it today you would earn a total of  906.00  from holding FIRST SAVINGS FINL or generate 63.18% return on investment over 90 days.

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

FIRST SAVINGS FINL  vs.  MITSUBISHI STEEL MFG

FIRST SAVINGS FINL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST SAVINGS FINL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FIRST SAVINGS reported solid returns over the last few months and may actually be approaching a breakup point.

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MITSUBISHI STEEL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FIRST SAVINGS and MITSUBISHI STEEL

The main advantage of trading using opposite FIRST SAVINGS and MITSUBISHI STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST SAVINGS 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 FIRST SAVINGS FINL 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.