Correlation Between Mitsubishi UFJ and L Catterton

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

Diversification Opportunities for Mitsubishi UFJ and L Catterton

0.71

Correlation Coefficient

Mitsubishi UFJ  L Catterton

Poor diversification

The 3 months correlation between Mitsubishi and LCAAU is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and L Catterton Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L Catterton Asia 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 L Catterton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L Catterton Asia has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and L Catterton go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and L Catterton

Assuming the 90 days horizon Mitsubishi UFJ Financial is expected to generate 3.72 times more return on investment than L Catterton. However, Mitsubishi UFJ is 3.72 times more volatile than L Catterton Asia. It trades about 0.06 of its potential returns per unit of risk. L Catterton Asia is currently generating about 0.05 per unit of risk. If you would invest  621.00  in Mitsubishi UFJ Financial on September 19, 2024 and sell it today you would earn a total of  570.00  from holding Mitsubishi UFJ Financial or generate 91.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	30.26%
Values	Daily Returns

Mitsubishi UFJ Financial  vs.  L Catterton Asia

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.

L Catterton Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L Catterton Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, L Catterton is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mitsubishi UFJ and L Catterton

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

The idea behind Mitsubishi UFJ Financial and L Catterton Asia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.