Correlation Between Mitsubishi Electric and Ilika Plc

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

By analyzing existing cross correlation between Mitsubishi Electric and Ilika plc, you can compare the effects of market volatilities on Mitsubishi Electric and Ilika Plc 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 Ilika Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Electric and Ilika Plc.

Diversification Opportunities for Mitsubishi Electric and Ilika Plc

-0.61

Correlation Coefficient

Mitsubishi Electric  Ilika Plc

Excellent diversification

The 3 months correlation between Mitsubishi and Ilika is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric and Ilika plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ilika plc 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 Ilika Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ilika plc has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and Ilika Plc go up and down completely randomly.

Pair Corralation between Mitsubishi Electric and Ilika Plc

Assuming the 90 days horizon Mitsubishi Electric is expected to generate 0.77 times more return on investment than Ilika Plc. However, Mitsubishi Electric is 1.29 times less risky than Ilika Plc. It trades about 0.04 of its potential returns per unit of risk. Ilika plc is currently generating about -0.02 per unit of risk. If you would invest  1,657  in Mitsubishi Electric on September 2, 2024 and sell it today you would earn a total of  84.00  from holding Mitsubishi Electric or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Mitsubishi Electric  vs.  Ilika plc

Mitsubishi Electric

Risk-Adjusted Performance

3 of 100

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 essential indicators, Mitsubishi Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ilika plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ilika plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Ilika Plc 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 Electric and Ilika Plc

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

The idea behind Mitsubishi Electric and Ilika plc 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.