Correlation Between Mitsubishi UFJ and Orange SA

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

Diversification Opportunities for Mitsubishi UFJ and Orange SA

-0.44

Correlation Coefficient

Mitsubishi UFJ  Orange SA

Very good diversification

The 3 months correlation between Mitsubishi and Orange is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Orange SA go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Orange SA

Assuming the 90 days horizon Mitsubishi UFJ Financial is expected to generate 1.1 times more return on investment than Orange SA. However, Mitsubishi UFJ is 1.1 times more volatile than Orange SA. It trades about 0.13 of its potential returns per unit of risk. Orange SA is currently generating about 0.04 per unit of risk. If you would invest  978.00  in Mitsubishi UFJ Financial on October 26, 2024 and sell it today you would earn a total of  247.00  from holding Mitsubishi UFJ Financial or generate 25.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Mitsubishi UFJ Financial  vs.  Orange SA

Mitsubishi UFJ Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 10 (%) 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.

Orange SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Orange SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mitsubishi UFJ and Orange SA

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

The idea behind Mitsubishi UFJ Financial and Orange SA 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.