Correlation Between Hitachi and Mitsubishi Corp

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

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

Diversification Opportunities for Hitachi and Mitsubishi Corp

0.35

Correlation Coefficient

Hitachi  Mitsubishi Corp

Weak diversification

The 3 months correlation between Hitachi and Mitsubishi is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR and Mitsubishi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Corp and Hitachi 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 Hitachi Ltd ADR are associated (or correlated) with Mitsubishi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Corp has no effect on the direction of Hitachi i.e., Hitachi and Mitsubishi Corp go up and down completely randomly.

Pair Corralation between Hitachi and Mitsubishi Corp

Assuming the 90 days horizon Hitachi Ltd ADR is expected to generate 1.18 times more return on investment than Mitsubishi Corp. However, Hitachi is 1.18 times more volatile than Mitsubishi Corp. It trades about 0.09 of its potential returns per unit of risk. Mitsubishi Corp is currently generating about 0.07 per unit of risk. If you would invest  2,072  in Hitachi Ltd ADR on September 3, 2024 and sell it today you would earn a total of  2,956  from holding Hitachi Ltd ADR or generate 142.66% return on investment over 90 days.

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

Hitachi Ltd ADR  vs.  Mitsubishi Corp

Hitachi Ltd ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Ltd ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Hitachi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mitsubishi Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical 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 Hitachi and Mitsubishi Corp

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

The idea behind Hitachi Ltd ADR and Mitsubishi Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.