Correlation Between CHIBA BANK and Mitsubishi UFJ

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

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

Diversification Opportunities for CHIBA BANK and Mitsubishi UFJ

0.8

Correlation Coefficient

CHIBA BANK  Mitsubishi UFJ

Very poor diversification

The 3 months correlation between CHIBA and Mitsubishi is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CHIBA BANK 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 CHIBA BANK 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 CHIBA BANK 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 CHIBA BANK i.e., CHIBA BANK and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between CHIBA BANK and Mitsubishi UFJ

Assuming the 90 days trading horizon CHIBA BANK is expected to generate 2.03 times less return on investment than Mitsubishi UFJ. In addition to that, CHIBA BANK is 1.01 times more volatile than Mitsubishi UFJ Financial. It trades about 0.09 of its total potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.19 per unit of volatility. If you would invest  900.00  in Mitsubishi UFJ Financial on September 17, 2024 and sell it today you would earn a total of  235.00  from holding Mitsubishi UFJ Financial or generate 26.11% return on investment over 90 days.

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

CHIBA BANK  vs.  Mitsubishi UFJ Financial

CHIBA BANK

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHIBA BANK are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CHIBA BANK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mitsubishi UFJ reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHIBA BANK and Mitsubishi UFJ

The main advantage of trading using opposite CHIBA BANK and Mitsubishi UFJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHIBA BANK 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 CHIBA BANK 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.