Correlation Between Mitsubishi UFJ and Alaska Air

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

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

Diversification Opportunities for Mitsubishi UFJ and Alaska Air

0.75

Correlation Coefficient

Mitsubishi UFJ  Alaska Air

Poor diversification

The 3 months correlation between Mitsubishi and Alaska is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Alaska Air Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group, and Mitsubishi UFJ 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 Mitsubishi UFJ Financial are associated (or correlated) with Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group, has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Alaska Air go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Alaska Air

Assuming the 90 days trading horizon Mitsubishi UFJ Financial is expected to under-perform the Alaska Air. But the stock apears to be less risky and, when comparing its historical volatility, Mitsubishi UFJ Financial is 2.19 times less risky than Alaska Air. The stock trades about -0.13 of its potential returns per unit of risk. The Alaska Air Group, is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  34,066  in Alaska Air Group, on October 11, 2024 and sell it today you would earn a total of  6,034  from holding Alaska Air Group, or generate 17.71% return on investment over 90 days.

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

Mitsubishi UFJ Financial  vs.  Alaska Air Group,

Mitsubishi UFJ Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mitsubishi UFJ sustained solid returns over the last few months and may actually be approaching a breakup point.

Alaska Air Group,

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group, are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Alaska Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi UFJ and Alaska Air

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

The idea behind Mitsubishi UFJ Financial and Alaska Air Group, 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.