Correlation Between Mitsubishi UFJ and Stanley Electric

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

Diversification Opportunities for Mitsubishi UFJ and Stanley Electric

0.47

Correlation Coefficient

Mitsubishi UFJ  Stanley Electric

Very weak diversification

The 3 months correlation between Mitsubishi and Stanley is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Stanley Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Electric 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 Stanley Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Electric has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Stanley Electric go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Stanley Electric

Assuming the 90 days trading horizon Mitsubishi UFJ is expected to generate 1.16 times less return on investment than Stanley Electric. But when comparing it to its historical volatility, Mitsubishi UFJ Financial is 1.32 times less risky than Stanley Electric. It trades about 0.14 of its potential returns per unit of risk. Stanley Electric Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,523  in Stanley Electric Co on December 30, 2024 and sell it today you would earn a total of  267.00  from holding Stanley Electric Co or generate 17.53% 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.  Stanley Electric Co

Mitsubishi UFJ Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 11 (%) 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.

Stanley Electric

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stanley Electric Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Stanley Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi UFJ and Stanley Electric

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

The idea behind Mitsubishi UFJ Financial and Stanley Electric Co 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..