Correlation Between Mitsubishi UFJ and BorgWarner

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

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

Diversification Opportunities for Mitsubishi UFJ and BorgWarner

-0.11

Correlation Coefficient

Mitsubishi UFJ  BorgWarner

Good diversification

The 3 months correlation between Mitsubishi and BorgWarner is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Lease and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Mitsubishi UFJ 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 UFJ Lease are associated (or correlated) with BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and BorgWarner go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and BorgWarner

Assuming the 90 days horizon Mitsubishi UFJ Lease is expected to generate 2.15 times more return on investment than BorgWarner. However, Mitsubishi UFJ is 2.15 times more volatile than BorgWarner. It trades about 0.01 of its potential returns per unit of risk. BorgWarner is currently generating about -0.14 per unit of risk. If you would invest  1,354  in Mitsubishi UFJ Lease on December 2, 2024 and sell it today you would lose (4.00) from holding Mitsubishi UFJ Lease or give up 0.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.05%
Values	Daily Returns

Mitsubishi UFJ Lease  vs.  BorgWarner

Mitsubishi UFJ Lease

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Lease are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Mitsubishi UFJ is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

BorgWarner

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Mitsubishi UFJ and BorgWarner

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

The idea behind Mitsubishi UFJ Lease and BorgWarner 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.