Correlation Between Mitsubishi Estate and Lend Lease

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

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

Diversification Opportunities for Mitsubishi Estate and Lend Lease

0.34

Correlation Coefficient

Mitsubishi Estate  Lend Lease

Weak diversification

The 3 months correlation between Mitsubishi and Lend is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Estate Co and Lend Lease Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lend Lease Group and Mitsubishi Estate 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 Estate Co are associated (or correlated) with Lend Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lend Lease Group has no effect on the direction of Mitsubishi Estate i.e., Mitsubishi Estate and Lend Lease go up and down completely randomly.

Pair Corralation between Mitsubishi Estate and Lend Lease

Assuming the 90 days horizon Mitsubishi Estate Co is expected to generate 0.29 times more return on investment than Lend Lease. However, Mitsubishi Estate Co is 3.41 times less risky than Lend Lease. It trades about -0.02 of its potential returns per unit of risk. Lend Lease Group is currently generating about -0.19 per unit of risk. If you would invest  1,405  in Mitsubishi Estate Co on October 10, 2024 and sell it today you would lose (13.00) from holding Mitsubishi Estate Co or give up 0.93% of portfolio value over 90 days.

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

Mitsubishi Estate Co  vs.  Lend Lease Group

Mitsubishi Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Estate Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lend Lease Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lend Lease Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mitsubishi Estate and Lend Lease

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

The idea behind Mitsubishi Estate Co and Lend Lease Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.