Correlation Between Mitsubishi UFJ and Incitec Pivot

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

Diversification Opportunities for Mitsubishi UFJ and Incitec Pivot

-0.43

Correlation Coefficient

Mitsubishi UFJ  Incitec Pivot

Very good diversification

The 3 months correlation between Mitsubishi and Incitec is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Incitec Pivot Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Incitec Pivot 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 Incitec Pivot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Incitec Pivot has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Incitec Pivot go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Incitec Pivot

Assuming the 90 days horizon Mitsubishi UFJ Financial is expected to generate 0.94 times more return on investment than Incitec Pivot. However, Mitsubishi UFJ Financial is 1.07 times less risky than Incitec Pivot. It trades about 0.04 of its potential returns per unit of risk. Incitec Pivot Ltd is currently generating about 0.03 per unit of risk. If you would invest  842.00  in Mitsubishi UFJ Financial on October 3, 2024 and sell it today you would earn a total of  223.00  from holding Mitsubishi UFJ Financial or generate 26.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.24%
Values	Daily Returns

Mitsubishi UFJ Financial  vs.  Incitec Pivot Ltd

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.

Incitec Pivot

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Incitec Pivot Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Incitec Pivot is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mitsubishi UFJ and Incitec Pivot

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

The idea behind Mitsubishi UFJ Financial and Incitec Pivot Ltd 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.