Correlation Between Mitsubishi Heavy and Nel ASA

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

Diversification Opportunities for Mitsubishi Heavy and Nel ASA

0.49

Correlation Coefficient

Mitsubishi Heavy  Nel ASA

Very weak diversification

The 3 months correlation between Mitsubishi and Nel is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Heavy Industries and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Mitsubishi Heavy i.e., Mitsubishi Heavy and Nel ASA go up and down completely randomly.

Pair Corralation between Mitsubishi Heavy and Nel ASA

Assuming the 90 days horizon Mitsubishi Heavy is expected to generate 1.07 times less return on investment than Nel ASA. But when comparing it to its historical volatility, Mitsubishi Heavy Industries is 2.31 times less risky than Nel ASA. It trades about 0.15 of its potential returns per unit of risk. Nel ASA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Nel ASA on December 21, 2024 and sell it today you would earn a total of  4.00  from holding Nel ASA or generate 16.0% return on investment over 90 days.

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

Mitsubishi Heavy Industries  vs.  Nel ASA

Mitsubishi Heavy Ind

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Heavy Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Mitsubishi Heavy reported solid returns over the last few months and may actually be approaching a breakup point.

Nel ASA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nel ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nel ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi Heavy and Nel ASA

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

The idea behind Mitsubishi Heavy Industries and Nel ASA 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..