Correlation Between Mitsubishi Gas and Yancoal Australia

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

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

Diversification Opportunities for Mitsubishi Gas and Yancoal Australia

-0.29

Correlation Coefficient

Mitsubishi Gas  Yancoal Australia

Very good diversification

The 3 months correlation between Mitsubishi and Yancoal is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Gas Chemical and Yancoal Australia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yancoal Australia and Mitsubishi Gas 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 Gas Chemical are associated (or correlated) with Yancoal Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yancoal Australia has no effect on the direction of Mitsubishi Gas i.e., Mitsubishi Gas and Yancoal Australia go up and down completely randomly.

Pair Corralation between Mitsubishi Gas and Yancoal Australia

Assuming the 90 days trading horizon Mitsubishi Gas is expected to generate 1.33 times less return on investment than Yancoal Australia. But when comparing it to its historical volatility, Mitsubishi Gas Chemical is 2.34 times less risky than Yancoal Australia. It trades about 0.02 of its potential returns per unit of risk. Yancoal Australia is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Yancoal Australia on October 10, 2024 and sell it today you would lose (2.00) from holding Yancoal Australia or give up 0.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Mitsubishi Gas Chemical  vs.  Yancoal Australia

Mitsubishi Gas Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Gas Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mitsubishi Gas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Yancoal Australia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yancoal Australia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Yancoal Australia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsubishi Gas and Yancoal Australia

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

The idea behind Mitsubishi Gas Chemical and Yancoal Australia 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.