Correlation Between Banco Bilbao and Mitsubishi UFJ

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

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

Diversification Opportunities for Banco Bilbao and Mitsubishi UFJ

0.88

Correlation Coefficient

Banco Bilbao  Mitsubishi UFJ

Very poor diversification

The 3 months correlation between Banco and Mitsubishi is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Banco Bilbao Viscaya and Mitsubishi UFJ Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Financial and Banco Bilbao 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 Banco Bilbao Viscaya 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 Financial has no effect on the direction of Banco Bilbao i.e., Banco Bilbao and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Banco Bilbao and Mitsubishi UFJ

Given the investment horizon of 90 days Banco Bilbao Viscaya is expected to generate 1.13 times more return on investment than Mitsubishi UFJ. However, Banco Bilbao is 1.13 times more volatile than Mitsubishi UFJ Financial. It trades about 0.33 of its potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.06 per unit of risk. If you would invest  943.00  in Banco Bilbao Viscaya on December 1, 2024 and sell it today you would earn a total of  380.00  from holding Banco Bilbao Viscaya or generate 40.3% return on investment over 90 days.

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

Banco Bilbao Viscaya  vs.  Mitsubishi UFJ Financial

Banco Bilbao Viscaya

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Viscaya are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Banco Bilbao sustained solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Mitsubishi UFJ is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Banco Bilbao and Mitsubishi UFJ

The main advantage of trading using opposite Banco Bilbao and Mitsubishi UFJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Bilbao 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 Banco Bilbao Viscaya and Mitsubishi UFJ Financial 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.