Correlation Between Macquarie Group and Mitsubishi Estate

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

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

Diversification Opportunities for Macquarie Group and Mitsubishi Estate

-0.41

Correlation Coefficient

Macquarie Group  Mitsubishi Estate

Very good diversification

The 3 months correlation between Macquarie and Mitsubishi is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Ltd and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate and Macquarie Group 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 Macquarie Group Ltd 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 Macquarie Group i.e., Macquarie Group and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between Macquarie Group and Mitsubishi Estate

Assuming the 90 days horizon Macquarie Group Ltd is expected to under-perform the Mitsubishi Estate. In addition to that, Macquarie Group is 1.24 times more volatile than Mitsubishi Estate Co. It trades about -0.11 of its total potential returns per unit of risk. Mitsubishi Estate Co is currently generating about 0.18 per unit of volatility. If you would invest  1,374  in Mitsubishi Estate Co on December 23, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Macquarie Group Ltd  vs.  Mitsubishi Estate Co

Macquarie Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Macquarie Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 fragile 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 Macquarie Group and Mitsubishi Estate

The main advantage of trading using opposite Macquarie Group and Mitsubishi Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Group 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 Macquarie Group Ltd 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 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.