Correlation Between Mitsubishi UFJ and Visteon Corp

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

Diversification Opportunities for Mitsubishi UFJ and Visteon Corp

0.03

Correlation Coefficient

Mitsubishi UFJ  Visteon Corp

Significant diversification

The 3 months correlation between Mitsubishi and Visteon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Lease and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp 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 Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Visteon Corp go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Visteon Corp

Assuming the 90 days horizon Mitsubishi UFJ Lease is expected to under-perform the Visteon Corp. In addition to that, Mitsubishi UFJ is 1.92 times more volatile than Visteon Corp. It trades about -0.03 of its total potential returns per unit of risk. Visteon Corp is currently generating about 0.13 per unit of volatility. If you would invest  9,040  in Visteon Corp on September 4, 2024 and sell it today you would earn a total of  496.00  from holding Visteon Corp or generate 5.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Mitsubishi UFJ Lease  vs.  Visteon Corp

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 latest abnormal performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Visteon Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visteon Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Visteon Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mitsubishi UFJ and Visteon Corp

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

The idea behind Mitsubishi UFJ Lease and Visteon Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.