Correlation Between Mitsubishi Electric and TDK

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

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

Diversification Opportunities for Mitsubishi Electric and TDK

-0.32

Correlation Coefficient

Mitsubishi Electric  TDK

Very good diversification

The 3 months correlation between Mitsubishi and TDK is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric and TDK Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TDK Corporation and Mitsubishi Electric 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 Electric are associated (or correlated) with TDK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TDK Corporation has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and TDK go up and down completely randomly.

Pair Corralation between Mitsubishi Electric and TDK

Assuming the 90 days trading horizon Mitsubishi Electric is expected to generate 1.13 times more return on investment than TDK. However, Mitsubishi Electric is 1.13 times more volatile than TDK Corporation. It trades about 0.05 of its potential returns per unit of risk. TDK Corporation is currently generating about -0.17 per unit of risk. If you would invest  1,637  in Mitsubishi Electric on December 30, 2024 and sell it today you would earn a total of  87.00  from holding Mitsubishi Electric or generate 5.31% return on investment over 90 days.

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

Mitsubishi Electric  vs.  TDK Corp.

Mitsubishi Electric

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mitsubishi Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TDK Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days TDK Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mitsubishi Electric and TDK

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

The idea behind Mitsubishi Electric and TDK Corporation 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.