Correlation Between Mitsubishi Electric and Nel ASA

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

Diversification Opportunities for Mitsubishi Electric and Nel ASA

-0.45

Correlation Coefficient

Mitsubishi Electric  Nel ASA

Very good diversification

The 3 months correlation between Mitsubishi and Nel is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric Corp and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel ASA 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 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 Electric i.e., Mitsubishi Electric and Nel ASA go up and down completely randomly.

Pair Corralation between Mitsubishi Electric and Nel ASA

Assuming the 90 days horizon Mitsubishi Electric Corp is expected to generate 0.28 times more return on investment than Nel ASA. However, Mitsubishi Electric Corp is 3.58 times less risky than Nel ASA. It trades about -0.09 of its potential returns per unit of risk. Nel ASA is currently generating about -0.03 per unit of risk. If you would invest  3,435  in Mitsubishi Electric Corp on October 9, 2024 and sell it today you would lose (68.00) from holding Mitsubishi Electric Corp or give up 1.98% of portfolio value over 90 days.

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

Mitsubishi Electric Corp  vs.  Nel ASA

Mitsubishi Electric Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric Corp are ranked lower than 4 (%) 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 February 2025.

Nel ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nel ASA 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mitsubishi Electric and Nel ASA

The main advantage of trading using opposite Mitsubishi Electric and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Electric 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 Electric Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .