Correlation Between Mitsubishi Electric and Prysmian SpA

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

Diversification Opportunities for Mitsubishi Electric and Prysmian SpA

-0.23

Correlation Coefficient

Mitsubishi Electric  Prysmian SpA

Very good diversification

The 3 months correlation between Mitsubishi and Prysmian is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric Corp and Prysmian SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prysmian SpA 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 Prysmian SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prysmian SpA has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and Prysmian SpA go up and down completely randomly.

Pair Corralation between Mitsubishi Electric and Prysmian SpA

Assuming the 90 days horizon Mitsubishi Electric Corp is expected to under-perform the Prysmian SpA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mitsubishi Electric Corp is 2.07 times less risky than Prysmian SpA. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Prysmian SpA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,373  in Prysmian SpA on December 1, 2024 and sell it today you would lose (285.00) from holding Prysmian SpA or give up 4.47% of portfolio value over 90 days.

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

Mitsubishi Electric Corp  vs.  Prysmian SpA

Mitsubishi Electric Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mitsubishi Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Prysmian SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prysmian SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Prysmian SpA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsubishi Electric and Prysmian SpA

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

The idea behind Mitsubishi Electric Corp and Prysmian SpA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.