Correlation Between MPH Health and Mitsubishi Electric

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

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

Diversification Opportunities for MPH Health and Mitsubishi Electric

-0.25

Correlation Coefficient

MPH Health  Mitsubishi Electric

Very good diversification

The 3 months correlation between MPH and Mitsubishi is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding MPH Health Care and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric and MPH Health 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 MPH Health Care 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 MPH Health i.e., MPH Health and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between MPH Health and Mitsubishi Electric

Assuming the 90 days trading horizon MPH Health Care is expected to under-perform the Mitsubishi Electric. But the stock apears to be less risky and, when comparing its historical volatility, MPH Health Care is 1.12 times less risky than Mitsubishi Electric. The stock trades about -0.02 of its potential returns per unit of risk. The Mitsubishi Electric is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,380  in Mitsubishi Electric on October 25, 2024 and sell it today you would earn a total of  222.00  from holding Mitsubishi Electric or generate 16.09% return on investment over 90 days.

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

MPH Health Care  vs.  Mitsubishi Electric

MPH Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MPH Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MPH Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Mitsubishi Electric

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with MPH Health and Mitsubishi Electric

The main advantage of trading using opposite MPH Health and Mitsubishi Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPH Health 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 MPH Health Care 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.