Correlation Between Mitsubishi and Iwatani

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

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

Diversification Opportunities for Mitsubishi and Iwatani

-0.29

Correlation Coefficient

Mitsubishi  Iwatani

Very good diversification

The 3 months correlation between Mitsubishi and Iwatani is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi and Iwatani in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iwatani 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 Iwatani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iwatani has no effect on the direction of Mitsubishi i.e., Mitsubishi and Iwatani go up and down completely randomly.

Pair Corralation between Mitsubishi and Iwatani

Assuming the 90 days horizon Mitsubishi is expected to generate 1.6 times more return on investment than Iwatani. However, Mitsubishi is 1.6 times more volatile than Iwatani. It trades about 0.08 of its potential returns per unit of risk. Iwatani is currently generating about -0.09 per unit of risk. If you would invest  1,524  in Mitsubishi on December 30, 2024 and sell it today you would earn a total of  167.00  from holding Mitsubishi or generate 10.96% return on investment over 90 days.

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

Mitsubishi  vs.  Iwatani

Mitsubishi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Mitsubishi may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Iwatani

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iwatani has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mitsubishi and Iwatani

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

The idea behind Mitsubishi and Iwatani 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..