Correlation Between Mitsubishi UFJ and HE Equipment

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

Diversification Opportunities for Mitsubishi UFJ and HE Equipment

-0.63

Correlation Coefficient

Mitsubishi UFJ  HE Equipment

Excellent diversification

The 3 months correlation between Mitsubishi and HEES is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Lease and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services 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 HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and HE Equipment go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and HE Equipment

Assuming the 90 days horizon Mitsubishi UFJ is expected to generate 32.15 times less return on investment than HE Equipment. In addition to that, Mitsubishi UFJ is 1.38 times more volatile than HE Equipment Services. It trades about 0.0 of its total potential returns per unit of risk. HE Equipment Services is currently generating about 0.18 per unit of volatility. If you would invest  4,342  in HE Equipment Services on September 13, 2024 and sell it today you would earn a total of  1,329  from holding HE Equipment Services or generate 30.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Mitsubishi UFJ Lease  vs.  HE Equipment Services

Mitsubishi UFJ Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi UFJ Lease has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

HE Equipment Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi UFJ and HE Equipment

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

The idea behind Mitsubishi UFJ Lease and HE Equipment Services 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.