Correlation Between CITIC and Mitsubishi

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

By analyzing existing cross correlation between CITIC LTD ADR5 and Mitsubishi, you can compare the effects of market volatilities on CITIC and Mitsubishi 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 CITIC with a short position of Mitsubishi. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC and Mitsubishi.

Diversification Opportunities for CITIC and Mitsubishi

-0.09

Correlation Coefficient

CITIC  Mitsubishi

Good diversification

The 3 months correlation between CITIC and Mitsubishi is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding CITIC LTD ADR5 and Mitsubishi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi and CITIC 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 CITIC LTD ADR5 are associated (or correlated) with Mitsubishi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi has no effect on the direction of CITIC i.e., CITIC and Mitsubishi go up and down completely randomly.

Pair Corralation between CITIC and Mitsubishi

Assuming the 90 days trading horizon CITIC LTD ADR5 is expected to generate 0.93 times more return on investment than Mitsubishi. However, CITIC LTD ADR5 is 1.07 times less risky than Mitsubishi. It trades about 0.04 of its potential returns per unit of risk. Mitsubishi is currently generating about -0.18 per unit of risk. If you would invest  515.00  in CITIC LTD ADR5 on September 23, 2024 and sell it today you would earn a total of  5.00  from holding CITIC LTD ADR5 or generate 0.97% return on investment over 90 days.

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

CITIC LTD ADR5  vs.  Mitsubishi

CITIC LTD ADR5

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC LTD ADR5 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CITIC and Mitsubishi

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

The idea behind CITIC LTD ADR5 and Mitsubishi 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.