Correlation Between Mitsubishi UFJ and Fair Isaac

Can any of the company-specific risk be diversified away by investing in both Mitsubishi UFJ and Fair Isaac 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 Fair Isaac 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 Fair Isaac, you can compare the effects of market volatilities on Mitsubishi UFJ and Fair Isaac 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 Fair Isaac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi UFJ and Fair Isaac.

Diversification Opportunities for Mitsubishi UFJ and Fair Isaac

0.57

Correlation Coefficient

Mitsubishi UFJ  Fair Isaac

Very weak diversification

The 3 months correlation between Mitsubishi and Fair is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Fair Isaac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac 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 Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Fair Isaac go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Fair Isaac

Assuming the 90 days trading horizon Mitsubishi UFJ is expected to generate 1.85 times less return on investment than Fair Isaac. But when comparing it to its historical volatility, Mitsubishi UFJ Financial is 1.15 times less risky than Fair Isaac. It trades about 0.07 of its potential returns per unit of risk. Fair Isaac is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  59,000  in Fair Isaac on October 15, 2024 and sell it today you would earn a total of  133,350  from holding Fair Isaac or generate 226.02% return on investment over 90 days.

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

Mitsubishi UFJ Financial  vs.  Fair Isaac

Mitsubishi UFJ Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mitsubishi UFJ unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fair Isaac

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fair Isaac is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsubishi UFJ and Fair Isaac

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

The idea behind Mitsubishi UFJ Financial and Fair Isaac 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.