Correlation Between Barnes and Mitsubishi Estate

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

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

Diversification Opportunities for Barnes and Mitsubishi Estate

0.84

Correlation Coefficient

Barnes  Mitsubishi Estate

Very poor diversification

The 3 months correlation between Barnes and Mitsubishi is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate and Barnes 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 Barnes Group are associated (or correlated) with Mitsubishi Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Estate has no effect on the direction of Barnes i.e., Barnes and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between Barnes and Mitsubishi Estate

Taking into account the 90-day investment horizon Barnes is expected to generate 11.4 times less return on investment than Mitsubishi Estate. But when comparing it to its historical volatility, Barnes Group is 22.39 times less risky than Mitsubishi Estate. It trades about 0.34 of its potential returns per unit of risk. Mitsubishi Estate Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,384  in Mitsubishi Estate Co on December 29, 2024 and sell it today you would earn a total of  257.00  from holding Mitsubishi Estate Co or generate 18.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	29.51%
Values	Daily Returns

Barnes Group  vs.  Mitsubishi Estate Co

Barnes Group

Risk-Adjusted Performance

Strong

Over the last 90 days Barnes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Barnes is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Mitsubishi Estate

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Estate Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mitsubishi Estate showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barnes and Mitsubishi Estate

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

The idea behind Barnes Group and Mitsubishi Estate Co 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.