Correlation Between Kimberly Clark and Mitsubishi UFJ

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

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

Diversification Opportunities for Kimberly Clark and Mitsubishi UFJ

0.65

Correlation Coefficient

Kimberly Clark  Mitsubishi UFJ

Poor diversification

The 3 months correlation between Kimberly and Mitsubishi is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark 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 Kimberly Clark 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 Kimberly Clark 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 Kimberly Clark i.e., Kimberly Clark and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Kimberly Clark and Mitsubishi UFJ

Assuming the 90 days trading horizon Kimberly Clark is expected to generate 4.31 times less return on investment than Mitsubishi UFJ. But when comparing it to its historical volatility, Kimberly Clark is 1.9 times less risky than Mitsubishi UFJ. It trades about 0.03 of its potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,632  in Mitsubishi UFJ Financial on October 11, 2024 and sell it today you would earn a total of  3,546  from holding Mitsubishi UFJ Financial or generate 97.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.39%
Values	Daily Returns

Kimberly Clark  vs.  Mitsubishi UFJ Financial

Kimberly Clark

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Kimberly Clark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Kimberly Clark is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mitsubishi UFJ sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kimberly Clark and Mitsubishi UFJ

The main advantage of trading using opposite Kimberly Clark and Mitsubishi UFJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimberly Clark 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 Kimberly Clark 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.