Correlation Between Mitsubishi Heavy and KONE Oyj

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

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

Diversification Opportunities for Mitsubishi Heavy and KONE Oyj

0.03

Correlation Coefficient

Mitsubishi Heavy  KONE Oyj

Significant diversification

The 3 months correlation between Mitsubishi and KONE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Heavy Industries and KONE Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KONE Oyj and Mitsubishi Heavy 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 Heavy Industries are associated (or correlated) with KONE Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KONE Oyj has no effect on the direction of Mitsubishi Heavy i.e., Mitsubishi Heavy and KONE Oyj go up and down completely randomly.

Pair Corralation between Mitsubishi Heavy and KONE Oyj

Assuming the 90 days horizon Mitsubishi Heavy Industries is expected to generate 156.85 times more return on investment than KONE Oyj. However, Mitsubishi Heavy is 156.85 times more volatile than KONE Oyj. It trades about 0.27 of its potential returns per unit of risk. KONE Oyj is currently generating about 0.0 per unit of risk. If you would invest  322.00  in Mitsubishi Heavy Industries on October 10, 2024 and sell it today you would earn a total of  1,093  from holding Mitsubishi Heavy Industries or generate 339.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.89%
Values	Daily Returns

Mitsubishi Heavy Industries  vs.  KONE Oyj

Mitsubishi Heavy Ind

Risk-Adjusted Performance

0 of 100

Very Weak

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

KONE Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KONE Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mitsubishi Heavy and KONE Oyj

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

The idea behind Mitsubishi Heavy Industries and KONE Oyj 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.