Correlation Between Mitsubishi UFJ and Hess

Can any of the company-specific risk be diversified away by investing in both Mitsubishi UFJ and Hess 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 Hess 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 Hess Corporation, you can compare the effects of market volatilities on Mitsubishi UFJ and Hess 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 Hess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi UFJ and Hess.

Diversification Opportunities for Mitsubishi UFJ and Hess

0.49

Correlation Coefficient

Mitsubishi UFJ  Hess

Very weak diversification

The 3 months correlation between Mitsubishi and Hess is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Hess go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Hess

Assuming the 90 days trading horizon Mitsubishi UFJ Financial is expected to generate 33.85 times more return on investment than Hess. However, Mitsubishi UFJ is 33.85 times more volatile than Hess Corporation. It trades about 0.19 of its potential returns per unit of risk. Hess Corporation is currently generating about 0.16 per unit of risk. If you would invest  6,492  in Mitsubishi UFJ Financial on October 7, 2024 and sell it today you would earn a total of  718.00  from holding Mitsubishi UFJ Financial or generate 11.06% return on investment over 90 days.

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

Mitsubishi UFJ Financial  vs.  Hess Corp.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 17 (%) 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.

Hess

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mitsubishi UFJ and Hess

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

The idea behind Mitsubishi UFJ Financial and Hess Corporation 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.