Correlation Between Mitsubishi UFJ and Citigroup

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

By analyzing existing cross correlation between Mitsubishi UFJ Financial and Citigroup, you can compare the effects of market volatilities on Mitsubishi UFJ and Citigroup 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 UFJ with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi UFJ and Citigroup.

Diversification Opportunities for Mitsubishi UFJ and Citigroup

0.95

Correlation Coefficient

Mitsubishi UFJ  Citigroup

Almost no diversification

The 3 months correlation between Mitsubishi and Citigroup is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Mitsubishi UFJ 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 UFJ Financial are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Citigroup go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Citigroup

Assuming the 90 days horizon Mitsubishi UFJ is expected to generate 1.21 times less return on investment than Citigroup. In addition to that, Mitsubishi UFJ is 1.11 times more volatile than Citigroup. It trades about 0.17 of its total potential returns per unit of risk. Citigroup is currently generating about 0.23 per unit of volatility. If you would invest  5,176  in Citigroup on September 15, 2024 and sell it today you would earn a total of  1,601  from holding Citigroup or generate 30.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Mitsubishi UFJ Financial  vs.  Citigroup

Mitsubishi UFJ Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mitsubishi UFJ reported solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi UFJ and Citigroup

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

The idea behind Mitsubishi UFJ Financial and Citigroup 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.