Correlation Between Mitsubishi and Hitachi

Can any of the company-specific risk be diversified away by investing in both Mitsubishi and Hitachi 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 Hitachi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mitsubishi and Hitachi, you can compare the effects of market volatilities on Mitsubishi and Hitachi 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 Hitachi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi and Hitachi.

Diversification Opportunities for Mitsubishi and Hitachi

-0.11

Correlation Coefficient

Mitsubishi  Hitachi

Good diversification

The 3 months correlation between Mitsubishi and Hitachi is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi 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 Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of Mitsubishi i.e., Mitsubishi and Hitachi go up and down completely randomly.

Pair Corralation between Mitsubishi and Hitachi

Assuming the 90 days horizon Mitsubishi is expected to under-perform the Hitachi. But the stock apears to be less risky and, when comparing its historical volatility, Mitsubishi is 1.22 times less risky than Hitachi. The stock trades about -0.13 of its potential returns per unit of risk. The Hitachi is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,346  in Hitachi on September 23, 2024 and sell it today you would earn a total of  33.00  from holding Hitachi or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mitsubishi  vs.  Hitachi

Mitsubishi

Risk-Adjusted Performance

0 of 100

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.

Hitachi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hitachi is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsubishi and Hitachi

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

The idea behind Mitsubishi and Hitachi 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.