Correlation Between American Superconductor and Mitsubishi Heavy

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

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

Diversification Opportunities for American Superconductor and Mitsubishi Heavy

0.45

Correlation Coefficient

American Superconductor  Mitsubishi Heavy

Very weak diversification

The 3 months correlation between American and Mitsubishi is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Superconductor and Mitsubishi Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Heavy Ind and American Superconductor 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 American Superconductor are associated (or correlated) with Mitsubishi Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Heavy Ind has no effect on the direction of American Superconductor i.e., American Superconductor and Mitsubishi Heavy go up and down completely randomly.

Pair Corralation between American Superconductor and Mitsubishi Heavy

Given the investment horizon of 90 days American Superconductor is expected to under-perform the Mitsubishi Heavy. In addition to that, American Superconductor is 3.38 times more volatile than Mitsubishi Heavy Industries. It trades about -0.1 of its total potential returns per unit of risk. Mitsubishi Heavy Industries is currently generating about -0.11 per unit of volatility. If you would invest  1,498  in Mitsubishi Heavy Industries on December 4, 2024 and sell it today you would lose (98.00) from holding Mitsubishi Heavy Industries or give up 6.54% of portfolio value over 90 days.

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

American Superconductor  vs.  Mitsubishi Heavy Industries

American Superconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Superconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Mitsubishi Heavy Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mitsubishi Heavy Industries 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.

Pair Trading with American Superconductor and Mitsubishi Heavy

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

The idea behind American Superconductor and Mitsubishi Heavy Industries 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.