Correlation Between Mitsubishi UFJ and Sony

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

Diversification Opportunities for Mitsubishi UFJ and Sony

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Mitsubishi and Sony is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Sony Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sony 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 Sony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sony Group has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Sony go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Sony

Assuming the 90 days trading horizon Mitsubishi UFJ is expected to generate 23.35 times less return on investment than Sony. But when comparing it to its historical volatility, Mitsubishi UFJ Financial is 20.05 times less risky than Sony. It trades about 0.08 of its potential returns per unit of risk. Sony Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,584  in Sony Group on September 14, 2024 and sell it today you would earn a total of  5,916  from holding Sony Group or generate 78.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy88.38%
ValuesDaily Returns

Mitsubishi UFJ Financial  vs.  Sony Group

 Performance 
       Timeline  
Mitsubishi UFJ Financial 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
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.
Sony Group 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sony Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Sony sustained solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi UFJ and Sony Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mitsubishi UFJ and Sony

The main advantage of trading using opposite Mitsubishi UFJ and Sony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi UFJ position performs unexpectedly, Sony 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 Sony will offset losses from the drop in Sony's long position.
The idea behind Mitsubishi UFJ Financial and Sony 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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