Correlation Between Mitsubishi and SUMITOMO CORP

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

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

Diversification Opportunities for Mitsubishi and SUMITOMO CORP

0.25

Correlation Coefficient

Mitsubishi  SUMITOMO CORP

Modest diversification

The 3 months correlation between Mitsubishi and SUMITOMO is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi and SUMITOMO P SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO P SP 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 SUMITOMO CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO P SP has no effect on the direction of Mitsubishi i.e., Mitsubishi and SUMITOMO CORP go up and down completely randomly.

Pair Corralation between Mitsubishi and SUMITOMO CORP

Assuming the 90 days horizon Mitsubishi is expected to generate 1.37 times less return on investment than SUMITOMO CORP. In addition to that, Mitsubishi is 1.13 times more volatile than SUMITOMO P SP. It trades about 0.04 of its total potential returns per unit of risk. SUMITOMO P SP is currently generating about 0.07 per unit of volatility. If you would invest  1,990  in SUMITOMO P SP on November 29, 2024 and sell it today you would earn a total of  130.00  from holding SUMITOMO P SP or generate 6.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mitsubishi  vs.  SUMITOMO P SP

Mitsubishi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mitsubishi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SUMITOMO P SP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO P SP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain primary indicators, SUMITOMO CORP may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Mitsubishi and SUMITOMO CORP

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

The idea behind Mitsubishi and SUMITOMO P SP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..