Correlation Between EMCOR and Mitsubishi Estate

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

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

Diversification Opportunities for EMCOR and Mitsubishi Estate

-0.81

Correlation Coefficient

EMCOR  Mitsubishi Estate

Pay attention - limited upside

The 3 months correlation between EMCOR and Mitsubishi is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding EMCOR 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 EMCOR 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 EMCOR 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 EMCOR i.e., EMCOR and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between EMCOR and Mitsubishi Estate

Considering the 90-day investment horizon EMCOR Group is expected to generate 0.68 times more return on investment than Mitsubishi Estate. However, EMCOR Group is 1.48 times less risky than Mitsubishi Estate. It trades about 0.24 of its potential returns per unit of risk. Mitsubishi Estate Co is currently generating about 0.01 per unit of risk. If you would invest  46,150  in EMCOR Group on September 5, 2024 and sell it today you would earn a total of  4,809  from holding EMCOR Group or generate 10.42% return on investment over 90 days.

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

EMCOR Group  vs.  Mitsubishi Estate Co

EMCOR Group

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in EMCOR Group are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, EMCOR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Estate Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with EMCOR and Mitsubishi Estate

The main advantage of trading using opposite EMCOR and Mitsubishi Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCOR 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 EMCOR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.