Correlation Between Mitsui Fudosan and China Overseas

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

By analyzing existing cross correlation between Mitsui Fudosan Co and China Overseas Land, you can compare the effects of market volatilities on Mitsui Fudosan and China Overseas 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 Mitsui Fudosan with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Fudosan and China Overseas.

Diversification Opportunities for Mitsui Fudosan and China Overseas

0.31

Correlation Coefficient

Mitsui Fudosan  China Overseas

Weak diversification

The 3 months correlation between Mitsui and China is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Fudosan Co and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and Mitsui Fudosan 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 Mitsui Fudosan Co are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Mitsui Fudosan i.e., Mitsui Fudosan and China Overseas go up and down completely randomly.

Pair Corralation between Mitsui Fudosan and China Overseas

Assuming the 90 days horizon Mitsui Fudosan Co is expected to under-perform the China Overseas. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Fudosan Co is 3.1 times less risky than China Overseas. The stock trades about -0.1 of its potential returns per unit of risk. The China Overseas Land is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  134.00  in China Overseas Land on September 23, 2024 and sell it today you would earn a total of  17.00  from holding China Overseas Land or generate 12.69% return on investment over 90 days.

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

Mitsui Fudosan Co  vs.  China Overseas Land

Mitsui Fudosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Fudosan Co 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.

China Overseas Land

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Overseas Land are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Overseas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Fudosan and China Overseas

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

The idea behind Mitsui Fudosan Co and China Overseas Land 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.