Correlation Between Mitsubishi and ITOCHU

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

Diversification Opportunities for Mitsubishi and ITOCHU

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between Mitsubishi and ITOCHU is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU 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 ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of Mitsubishi i.e., Mitsubishi and ITOCHU go up and down completely randomly.

Pair Corralation between Mitsubishi and ITOCHU

Assuming the 90 days horizon Mitsubishi is expected to under-perform the ITOCHU. In addition to that, Mitsubishi is 1.2 times more volatile than ITOCHU. It trades about -0.13 of its total potential returns per unit of risk. ITOCHU is currently generating about -0.03 per unit of volatility. If you would invest  4,831  in ITOCHU on September 23, 2024 and sell it today you would lose (208.00) from holding ITOCHU or give up 4.31% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Mitsubishi  vs.  ITOCHU

 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.
ITOCHU 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ITOCHU has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITOCHU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsubishi and ITOCHU Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mitsubishi and ITOCHU

The main advantage of trading using opposite Mitsubishi and ITOCHU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi position performs unexpectedly, ITOCHU 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 ITOCHU will offset losses from the drop in ITOCHU's long position.
The idea behind Mitsubishi and ITOCHU 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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