Correlation Between Amazon and Mitsubishi Corp

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

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

Diversification Opportunities for Amazon and Mitsubishi Corp

-0.81

Correlation Coefficient

Amazon  Mitsubishi Corp

Pay attention - limited upside

The 3 months correlation between Amazon and Mitsubishi is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Mitsubishi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Corp and Amazon 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 Amazon Inc are associated (or correlated) with Mitsubishi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Corp has no effect on the direction of Amazon i.e., Amazon and Mitsubishi Corp go up and down completely randomly.

Pair Corralation between Amazon and Mitsubishi Corp

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Mitsubishi Corp. But the stock apears to be less risky and, when comparing its historical volatility, Amazon Inc is 1.26 times less risky than Mitsubishi Corp. The stock trades about -0.12 of its potential returns per unit of risk. The Mitsubishi Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,650  in Mitsubishi Corp on December 30, 2024 and sell it today you would earn a total of  150.00  from holding Mitsubishi Corp or generate 9.09% return on investment over 90 days.

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

Amazon Inc  vs.  Mitsubishi Corp

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Mitsubishi Corp

Risk-Adjusted Performance

Modest

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

Pair Trading with Amazon and Mitsubishi Corp

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

The idea behind Amazon Inc and Mitsubishi Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.