Correlation Between Arrow Electronics and Mitsubishi UFJ

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

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

Diversification Opportunities for Arrow Electronics and Mitsubishi UFJ

0.68

Correlation Coefficient

Arrow Electronics  Mitsubishi UFJ

Poor diversification

The 3 months correlation between Arrow and Mitsubishi is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Mitsubishi UFJ Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Lease and Arrow Electronics 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 Arrow Electronics are associated (or correlated) with Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Lease has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Arrow Electronics and Mitsubishi UFJ

Considering the 90-day investment horizon Arrow Electronics is expected to generate 5.5 times less return on investment than Mitsubishi UFJ. But when comparing it to its historical volatility, Arrow Electronics is 2.93 times less risky than Mitsubishi UFJ. It trades about 0.03 of its potential returns per unit of risk. Mitsubishi UFJ Lease is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  848.00  in Mitsubishi UFJ Lease on September 12, 2024 and sell it today you would earn a total of  500.00  from holding Mitsubishi UFJ Lease or generate 58.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	65.25%
Values	Daily Returns

Arrow Electronics  vs.  Mitsubishi UFJ Lease

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Mitsubishi UFJ Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi UFJ Lease has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Mitsubishi UFJ is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arrow Electronics and Mitsubishi UFJ

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

The idea behind Arrow Electronics and Mitsubishi UFJ Lease 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.