Correlation Between Citigroup and Mitsubishi Heavy

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

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

Diversification Opportunities for Citigroup and Mitsubishi Heavy

-0.44

Correlation Coefficient

Citigroup  Mitsubishi Heavy

Very good diversification

The 3 months correlation between Citigroup and Mitsubishi is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Mitsubishi Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Heavy Ind and Citigroup 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 Citigroup are associated (or correlated) with Mitsubishi Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Heavy Ind has no effect on the direction of Citigroup i.e., Citigroup and Mitsubishi Heavy go up and down completely randomly.

Pair Corralation between Citigroup and Mitsubishi Heavy

Taking into account the 90-day investment horizon Citigroup is expected to generate 13.94 times less return on investment than Mitsubishi Heavy. But when comparing it to its historical volatility, Citigroup is 1.99 times less risky than Mitsubishi Heavy. It trades about 0.01 of its potential returns per unit of risk. Mitsubishi Heavy Industries is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Mitsubishi Heavy Industries on December 30, 2024 and sell it today you would earn a total of  321.00  from holding Mitsubishi Heavy Industries or generate 22.93% return on investment over 90 days.

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

Citigroup  vs.  Mitsubishi Heavy Industries

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Mitsubishi Heavy Ind

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Heavy Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Mitsubishi Heavy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Mitsubishi Heavy

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

The idea behind Citigroup and Mitsubishi Heavy Industries 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.