Correlation Between Mitsubishi Corp and Teijin

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

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

Diversification Opportunities for Mitsubishi Corp and Teijin

0.85

Correlation Coefficient

Mitsubishi Corp  Teijin

Very poor diversification

The 3 months correlation between Mitsubishi and Teijin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Corp and Teijin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teijin 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 Teijin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teijin has no effect on the direction of Mitsubishi Corp i.e., Mitsubishi Corp and Teijin go up and down completely randomly.

Pair Corralation between Mitsubishi Corp and Teijin

Assuming the 90 days horizon Mitsubishi Corp is expected to generate 0.69 times more return on investment than Teijin. However, Mitsubishi Corp is 1.44 times less risky than Teijin. It trades about -0.1 of its potential returns per unit of risk. Teijin is currently generating about -0.08 per unit of risk. If you would invest  1,970  in Mitsubishi Corp on September 3, 2024 and sell it today you would lose (245.00) from holding Mitsubishi Corp or give up 12.44% of portfolio value over 90 days.

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

Mitsubishi Corp  vs.  Teijin

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 latest weak performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Teijin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teijin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Mitsubishi Corp and Teijin

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

The idea behind Mitsubishi Corp and Teijin 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.