Correlation Between Mass Megawat and Kansai Electric

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

By analyzing existing cross correlation between Mass Megawat Wind and Kansai Electric Power, you can compare the effects of market volatilities on Mass Megawat and Kansai Electric 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 Mass Megawat with a short position of Kansai Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mass Megawat and Kansai Electric.

Diversification Opportunities for Mass Megawat and Kansai Electric

-0.37

Correlation Coefficient

Mass Megawat  Kansai Electric

Very good diversification

The 3 months correlation between Mass and Kansai is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mass Megawat Wind and Kansai Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansai Electric Power and Mass Megawat 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 Mass Megawat Wind are associated (or correlated) with Kansai Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansai Electric Power has no effect on the direction of Mass Megawat i.e., Mass Megawat and Kansai Electric go up and down completely randomly.

Pair Corralation between Mass Megawat and Kansai Electric

Given the investment horizon of 90 days Mass Megawat Wind is expected to generate 3.39 times more return on investment than Kansai Electric. However, Mass Megawat is 3.39 times more volatile than Kansai Electric Power. It trades about 0.07 of its potential returns per unit of risk. Kansai Electric Power is currently generating about 0.07 per unit of risk. If you would invest  29.00  in Mass Megawat Wind on December 28, 2024 and sell it today you would lose (2.00) from holding Mass Megawat Wind or give up 6.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Mass Megawat Wind  vs.  Kansai Electric Power

Mass Megawat Wind

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mass Megawat Wind are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Mass Megawat showed solid returns over the last few months and may actually be approaching a breakup point.

Kansai Electric Power

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kansai Electric Power are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kansai Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mass Megawat and Kansai Electric

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

The idea behind Mass Megawat Wind and Kansai Electric Power 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.