Correlation Between Mitsubishi Corp and Compass Diversified

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

By analyzing existing cross correlation between Mitsubishi Corp and Compass Diversified Holdings, you can compare the effects of market volatilities on Mitsubishi Corp and Compass Diversified 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 Corp with a short position of Compass Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Corp and Compass Diversified.

Diversification Opportunities for Mitsubishi Corp and Compass Diversified

-0.62

Correlation Coefficient

Mitsubishi Corp  Compass Diversified

Excellent diversification

The 3 months correlation between Mitsubishi and Compass is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Corp and Compass Diversified Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Diversified and Mitsubishi Corp 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 Corp are associated (or correlated) with Compass Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Diversified has no effect on the direction of Mitsubishi Corp i.e., Mitsubishi Corp and Compass Diversified go up and down completely randomly.

Pair Corralation between Mitsubishi Corp and Compass Diversified

Assuming the 90 days horizon Mitsubishi Corp is expected to under-perform the Compass Diversified. In addition to that, Mitsubishi Corp is 1.11 times more volatile than Compass Diversified Holdings. It trades about -0.12 of its total potential returns per unit of risk. Compass Diversified Holdings is currently generating about 0.12 per unit of volatility. If you would invest  2,110  in Compass Diversified Holdings on September 2, 2024 and sell it today you would earn a total of  260.00  from holding Compass Diversified Holdings or generate 12.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Mitsubishi Corp  vs.  Compass Diversified Holdings

Mitsubishi Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compass Diversified

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compass Diversified Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental indicators, Compass Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mitsubishi Corp and Compass Diversified

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

The idea behind Mitsubishi Corp and Compass Diversified Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.