Correlation Between Mitsubishi Estate and Merchants National

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

Diversification Opportunities for Mitsubishi Estate and Merchants National

0.21

Correlation Coefficient

Mitsubishi Estate  Merchants National

Modest diversification

The 3 months correlation between Mitsubishi and Merchants is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Estate Co and Merchants National Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants National 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 Merchants National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants National has no effect on the direction of Mitsubishi Estate i.e., Mitsubishi Estate and Merchants National go up and down completely randomly.

Pair Corralation between Mitsubishi Estate and Merchants National

Assuming the 90 days horizon Mitsubishi Estate Co is expected to under-perform the Merchants National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mitsubishi Estate Co is 1.14 times less risky than Merchants National. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Merchants National Properties is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  173,500  in Merchants National Properties on October 10, 2024 and sell it today you would earn a total of  1,500  from holding Merchants National Properties or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Mitsubishi Estate Co  vs.  Merchants National Properties

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.

Merchants National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Merchants National Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Merchants National is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mitsubishi Estate and Merchants National

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

The idea behind Mitsubishi Estate Co and Merchants National Properties 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.