Correlation Between Apple and MITSUBISHI STEEL

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

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

Diversification Opportunities for Apple and MITSUBISHI STEEL

0.66

Correlation Coefficient

Apple  MITSUBISHI STEEL

Poor diversification

The 3 months correlation between Apple and MITSUBISHI is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and MITSUBISHI STEEL go up and down completely randomly.

Pair Corralation between Apple and MITSUBISHI STEEL

Assuming the 90 days trading horizon Apple is expected to generate 4.65 times less return on investment than MITSUBISHI STEEL. But when comparing it to its historical volatility, Apple Inc is 1.76 times less risky than MITSUBISHI STEEL. It trades about 0.12 of its potential returns per unit of risk. MITSUBISHI STEEL MFG is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  860.00  in MITSUBISHI STEEL MFG on October 5, 2024 and sell it today you would earn a total of  75.00  from holding MITSUBISHI STEEL MFG or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Apple Inc  vs.  MITSUBISHI STEEL MFG

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days MITSUBISHI STEEL MFG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, MITSUBISHI STEEL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Apple and MITSUBISHI STEEL

The main advantage of trading using opposite Apple and MITSUBISHI STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.