Correlation Between Mitsubishi UFJ and ENCP Old

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

Diversification Opportunities for Mitsubishi UFJ and ENCP Old

-0.26

Correlation Coefficient

Mitsubishi UFJ  ENCP Old

Very good diversification

The 3 months correlation between Mitsubishi and ENCP is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and ENCP Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENCP Old 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 ENCP Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENCP Old has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and ENCP Old go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and ENCP Old

Assuming the 90 days horizon Mitsubishi UFJ Financial is expected to generate 0.38 times more return on investment than ENCP Old. However, Mitsubishi UFJ Financial is 2.63 times less risky than ENCP Old. It trades about 0.05 of its potential returns per unit of risk. ENCP Old is currently generating about -0.01 per unit of risk. If you would invest  672.00  in Mitsubishi UFJ Financial on October 7, 2024 and sell it today you would earn a total of  448.00  from holding Mitsubishi UFJ Financial or generate 66.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.74%
Values	Daily Returns

Mitsubishi UFJ Financial  vs.  ENCP Old

Mitsubishi UFJ Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Mitsubishi UFJ may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ENCP Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENCP Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, ENCP Old is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mitsubishi UFJ and ENCP Old

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

The idea behind Mitsubishi UFJ Financial and ENCP Old 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.