Correlation Between Mitsubishi UFJ and Willis Lease

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

Diversification Opportunities for Mitsubishi UFJ and Willis Lease

-0.26

Correlation Coefficient

Mitsubishi UFJ  Willis Lease

Very good diversification

The 3 months correlation between Mitsubishi and Willis is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Lease and Willis Lease Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Lease Finance 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 Willis Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Lease Finance has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Willis Lease go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Willis Lease

Assuming the 90 days horizon Mitsubishi UFJ is expected to generate 2.25 times less return on investment than Willis Lease. In addition to that, Mitsubishi UFJ is 1.08 times more volatile than Willis Lease Finance. It trades about 0.02 of its total potential returns per unit of risk. Willis Lease Finance is currently generating about 0.05 per unit of volatility. If you would invest  18,154  in Willis Lease Finance on October 26, 2024 and sell it today you would earn a total of  1,496  from holding Willis Lease Finance or generate 8.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Mitsubishi UFJ Lease  vs.  Willis Lease Finance

Mitsubishi UFJ Lease

Risk-Adjusted Performance

1 of 100

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Willis Lease Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsubishi UFJ and Willis Lease

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

The idea behind Mitsubishi UFJ Lease and Willis Lease Finance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.