Correlation Between Mitsubishi UFJ and SUMITOMO P

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

Diversification Opportunities for Mitsubishi UFJ and SUMITOMO P

-0.38

Correlation Coefficient

Mitsubishi UFJ  SUMITOMO P

Very good diversification

The 3 months correlation between Mitsubishi and SUMITOMO is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and SUMITOMO P SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO P SP 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 SUMITOMO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO P SP has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and SUMITOMO P go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and SUMITOMO P

Assuming the 90 days trading horizon Mitsubishi UFJ Financial is expected to generate 1.22 times more return on investment than SUMITOMO P. However, Mitsubishi UFJ is 1.22 times more volatile than SUMITOMO P SP. It trades about 0.13 of its potential returns per unit of risk. SUMITOMO P SP is currently generating about -0.05 per unit of risk. If you would invest  940.00  in Mitsubishi UFJ Financial on August 31, 2024 and sell it today you would earn a total of  150.00  from holding Mitsubishi UFJ Financial or generate 15.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Mitsubishi UFJ Financial  vs.  SUMITOMO P SP

Mitsubishi UFJ Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Mitsubishi UFJ unveiled solid returns over the last few months and may actually be approaching a breakup point.

SUMITOMO P SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUMITOMO P SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, SUMITOMO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsubishi UFJ and SUMITOMO P

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

The idea behind Mitsubishi UFJ Financial and SUMITOMO P SP 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.