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 Corp 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

0.0

Correlation Coefficient

Mitsubishi Electric  Ilika Plc

Pay attention - limited upside

The 3 months correlation between Mitsubishi and Ilika is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric Corp 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 Corp 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 6.96 times less return on investment than Ilika Plc. But when comparing it to its historical volatility, Mitsubishi Electric Corp is 2.53 times less risky than Ilika Plc. It trades about 0.07 of its potential returns per unit of risk. Ilika plc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  26.00  in Ilika plc on December 30, 2024 and sell it today you would earn a total of  23.00  from holding Ilika plc or generate 88.46% return on investment over 90 days.

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

Mitsubishi Electric Corp  vs.  Ilika plc

Mitsubishi Electric Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Mitsubishi Electric may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ilika plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ilika plc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, Ilika Plc reported solid returns over the last few months and may actually be approaching a breakup point.

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 Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.