Correlation Between Mitsui Fudosan and Stratus Properties

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

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

Diversification Opportunities for Mitsui Fudosan and Stratus Properties

0.22

Correlation Coefficient

Mitsui Fudosan  Stratus Properties

Modest diversification

The 3 months correlation between Mitsui and Stratus is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Fudosan Co and Stratus Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratus Properties and Mitsui Fudosan 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 Mitsui Fudosan Co are associated (or correlated) with Stratus Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratus Properties has no effect on the direction of Mitsui Fudosan i.e., Mitsui Fudosan and Stratus Properties go up and down completely randomly.

Pair Corralation between Mitsui Fudosan and Stratus Properties

Assuming the 90 days horizon Mitsui Fudosan Co is expected to under-perform the Stratus Properties. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mitsui Fudosan Co is 2.42 times less risky than Stratus Properties. The pink sheet trades about -0.2 of its potential returns per unit of risk. The Stratus Properties is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,471  in Stratus Properties on September 2, 2024 and sell it today you would earn a total of  104.00  from holding Stratus Properties or generate 4.21% return on investment over 90 days.

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

Mitsui Fudosan Co  vs.  Stratus Properties

Mitsui Fudosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Fudosan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental 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.

Stratus Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stratus Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Stratus Properties may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mitsui Fudosan and Stratus Properties

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

The idea behind Mitsui Fudosan Co and Stratus Properties 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.