Correlation Between Mitsubishi and CITIC

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Can any of the company-specific risk be diversified away by investing in both Mitsubishi and CITIC 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 and CITIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi and CITIC LTD ADR5, you can compare the effects of market volatilities on Mitsubishi and CITIC 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 with a short position of CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi and CITIC.

Diversification Opportunities for Mitsubishi and CITIC

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Mitsubishi and CITIC is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 and Mitsubishi 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 are associated (or correlated) with CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of Mitsubishi i.e., Mitsubishi and CITIC go up and down completely randomly.

Pair Corralation between Mitsubishi and CITIC

Assuming the 90 days horizon Mitsubishi is expected to under-perform the CITIC. In addition to that, Mitsubishi is 1.07 times more volatile than CITIC LTD ADR5. It trades about -0.18 of its total potential returns per unit of risk. CITIC LTD ADR5 is currently generating about 0.04 per unit of volatility. If you would invest  515.00  in CITIC LTD ADR5 on September 23, 2024 and sell it today you would earn a total of  5.00  from holding CITIC LTD ADR5 or generate 0.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Mitsubishi  vs.  CITIC LTD ADR5

 Performance 
       Timeline  
Mitsubishi 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mitsubishi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
CITIC LTD ADR5 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CITIC LTD ADR5 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi and CITIC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mitsubishi and CITIC

The main advantage of trading using opposite Mitsubishi and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi position performs unexpectedly, CITIC 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 CITIC will offset losses from the drop in CITIC's long position.
The idea behind Mitsubishi and CITIC LTD ADR5 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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