Correlation Between Mitsui and Alaska Power

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

By analyzing existing cross correlation between Mitsui Co and Alaska Power Telephone, you can compare the effects of market volatilities on Mitsui and Alaska Power 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 Mitsui with a short position of Alaska Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui and Alaska Power.

Diversification Opportunities for Mitsui and Alaska Power

-0.43

Correlation Coefficient

Mitsui  Alaska Power

Very good diversification

The 3 months correlation between Mitsui and Alaska is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Co and Alaska Power Telephone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Power Telephone and Mitsui 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 Mitsui Co are associated (or correlated) with Alaska Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Power Telephone has no effect on the direction of Mitsui i.e., Mitsui and Alaska Power go up and down completely randomly.

Pair Corralation between Mitsui and Alaska Power

Assuming the 90 days horizon Mitsui Co is expected to generate 7.57 times more return on investment than Alaska Power. However, Mitsui is 7.57 times more volatile than Alaska Power Telephone. It trades about 0.04 of its potential returns per unit of risk. Alaska Power Telephone is currently generating about 0.02 per unit of risk. If you would invest  1,916  in Mitsui Co on September 12, 2024 and sell it today you would earn a total of  84.00  from holding Mitsui Co or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Mitsui Co  vs.  Alaska Power Telephone

Mitsui

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mitsui may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alaska Power Telephone

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Power Telephone are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Alaska Power is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mitsui and Alaska Power

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

The idea behind Mitsui Co and Alaska Power Telephone 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.