Correlation Between Merchants National and Mitsubishi Estate

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

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

Diversification Opportunities for Merchants National and Mitsubishi Estate

0.33

Correlation Coefficient

Merchants National  Mitsubishi Estate

Weak diversification

The 3 months correlation between Merchants and Mitsubishi is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Merchants National Properties and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate and Merchants National 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 Merchants National Properties are associated (or correlated) with Mitsubishi Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Estate has no effect on the direction of Merchants National i.e., Merchants National and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between Merchants National and Mitsubishi Estate

Given the investment horizon of 90 days Merchants National Properties is expected to under-perform the Mitsubishi Estate. But the pink sheet apears to be less risky and, when comparing its historical volatility, Merchants National Properties is 1.17 times less risky than Mitsubishi Estate. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Mitsubishi Estate Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,374  in Mitsubishi Estate Co on December 22, 2024 and sell it today you would earn a total of  205.00  from holding Mitsubishi Estate Co or generate 14.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Merchants National Properties  vs.  Mitsubishi Estate Co

Merchants National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merchants National Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Merchants National is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Mitsubishi Estate

Risk-Adjusted Performance

Good

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

Pair Trading with Merchants National and Mitsubishi Estate

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

The idea behind Merchants National Properties and Mitsubishi Estate Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.