Correlation Between Hongkong Land and Mitsubishi Estate

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

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

Diversification Opportunities for Hongkong Land and Mitsubishi Estate

-0.79

Correlation Coefficient

Hongkong Land  Mitsubishi Estate

Pay attention - limited upside

The 3 months correlation between Hongkong and Mitsubishi is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Hongkong Land Holdings and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate and Hongkong Land 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 Hongkong Land Holdings 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 Hongkong Land i.e., Hongkong Land and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between Hongkong Land and Mitsubishi Estate

Assuming the 90 days horizon Hongkong Land Holdings is expected to generate 1.87 times more return on investment than Mitsubishi Estate. However, Hongkong Land is 1.87 times more volatile than Mitsubishi Estate Co. It trades about 0.08 of its potential returns per unit of risk. Mitsubishi Estate Co is currently generating about -0.06 per unit of risk. If you would invest  372.00  in Hongkong Land Holdings on September 23, 2024 and sell it today you would earn a total of  38.00  from holding Hongkong Land Holdings or generate 10.22% return on investment over 90 days.

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

Hongkong Land Holdings  vs.  Mitsubishi Estate Co

Hongkong Land Holdings

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hongkong Land Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hongkong Land reported 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 nearly stable basic indicators, Mitsubishi Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hongkong Land and Mitsubishi Estate

The main advantage of trading using opposite Hongkong Land and Mitsubishi Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongkong Land 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 Hongkong Land Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.