Correlation Between Mitsubishi UFJ and Century Financial

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

Diversification Opportunities for Mitsubishi UFJ and Century Financial

0.78

Correlation Coefficient

Mitsubishi UFJ  Century Financial

Poor diversification

The 3 months correlation between Mitsubishi and Century is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Century Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Financial Corp 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 Century Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Financial Corp has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Century Financial go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Century Financial

Assuming the 90 days horizon Mitsubishi UFJ Financial is expected to generate 1.76 times more return on investment than Century Financial. However, Mitsubishi UFJ is 1.76 times more volatile than Century Financial Corp. It trades about 0.16 of its potential returns per unit of risk. Century Financial Corp is currently generating about 0.2 per unit of risk. If you would invest  1,065  in Mitsubishi UFJ Financial on December 30, 2024 and sell it today you would earn a total of  346.00  from holding Mitsubishi UFJ Financial or generate 32.49% 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.  Century Financial Corp

Mitsubishi UFJ Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Mitsubishi UFJ reported solid returns over the last few months and may actually be approaching a breakup point.

Century Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Financial Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Century Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi UFJ and Century Financial

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

The idea behind Mitsubishi UFJ Financial and Century Financial 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.