Correlation Between Mitsubishi Estate and Sumitomo Mitsui

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

Diversification Opportunities for Mitsubishi Estate and Sumitomo Mitsui

0.84

Correlation Coefficient

Mitsubishi Estate  Sumitomo Mitsui

Very poor diversification

The 3 months correlation between Mitsubishi and Sumitomo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Estate Co and Sumitomo Mitsui Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Trust 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Trust has no effect on the direction of Mitsubishi Estate i.e., Mitsubishi Estate and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Mitsubishi Estate and Sumitomo Mitsui

Assuming the 90 days horizon Mitsubishi Estate Co is expected to generate 1.28 times more return on investment than Sumitomo Mitsui. However, Mitsubishi Estate is 1.28 times more volatile than Sumitomo Mitsui Trust. It trades about 0.25 of its potential returns per unit of risk. Sumitomo Mitsui Trust is currently generating about 0.19 per unit of risk. If you would invest  1,376  in Mitsubishi Estate Co on December 25, 2024 and sell it today you would earn a total of  368.00  from holding Mitsubishi Estate Co or generate 26.74% return on investment over 90 days.

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

Mitsubishi Estate Co  vs.  Sumitomo Mitsui Trust

Mitsubishi Estate

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Estate Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mitsubishi Estate showed solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Mitsui Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sumitomo Mitsui showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi Estate and Sumitomo Mitsui

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

The idea behind Mitsubishi Estate Co and Sumitomo Mitsui Trust 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.