Correlation Between Mitsubishi UFJ and Peoples Insurance

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

Diversification Opportunities for Mitsubishi UFJ and Peoples Insurance

0.61

Correlation Coefficient

Mitsubishi UFJ  Peoples Insurance

Poor diversification

The 3 months correlation between Mitsubishi and Peoples is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and The Peoples Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Insurance 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 Peoples Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Insurance has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Peoples Insurance go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Peoples Insurance

Assuming the 90 days trading horizon Mitsubishi UFJ Financial is expected to generate 0.33 times more return on investment than Peoples Insurance. However, Mitsubishi UFJ Financial is 2.99 times less risky than Peoples Insurance. It trades about 0.2 of its potential returns per unit of risk. The Peoples Insurance is currently generating about 0.06 per unit of risk. If you would invest  910.00  in Mitsubishi UFJ Financial on October 8, 2024 and sell it today you would earn a total of  200.00  from holding Mitsubishi UFJ Financial or generate 21.98% return on investment over 90 days.

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

Mitsubishi UFJ Financial  vs.  The Peoples Insurance

Mitsubishi UFJ Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 15 (%) 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.

Peoples Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Mitsubishi UFJ and Peoples Insurance

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

The idea behind Mitsubishi UFJ Financial and The Peoples Insurance 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.