Correlation Between Mitsubishi Materials and AIRBNB INC

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

By analyzing existing cross correlation between Mitsubishi Materials and AIRBNB INC DL 01, you can compare the effects of market volatilities on Mitsubishi Materials and AIRBNB INC 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 Materials with a short position of AIRBNB INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Materials and AIRBNB INC.

Diversification Opportunities for Mitsubishi Materials and AIRBNB INC

0.16

Correlation Coefficient

Mitsubishi Materials  AIRBNB INC

Average diversification

The 3 months correlation between Mitsubishi and AIRBNB is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Materials and AIRBNB INC DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIRBNB INC DL and Mitsubishi Materials 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 Materials are associated (or correlated) with AIRBNB INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIRBNB INC DL has no effect on the direction of Mitsubishi Materials i.e., Mitsubishi Materials and AIRBNB INC go up and down completely randomly.

Pair Corralation between Mitsubishi Materials and AIRBNB INC

Assuming the 90 days trading horizon Mitsubishi Materials is expected to generate 6.89 times less return on investment than AIRBNB INC. But when comparing it to its historical volatility, Mitsubishi Materials is 1.43 times less risky than AIRBNB INC. It trades about 0.01 of its potential returns per unit of risk. AIRBNB INC DL 01 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,416  in AIRBNB INC DL 01 on November 27, 2024 and sell it today you would earn a total of  3,490  from holding AIRBNB INC DL 01 or generate 33.51% return on investment over 90 days.

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

Mitsubishi Materials  vs.  AIRBNB INC DL 01

Mitsubishi Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mitsubishi Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking indicators, Mitsubishi Materials is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

AIRBNB INC DL

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIRBNB INC DL 01 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIRBNB INC may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Mitsubishi Materials and AIRBNB INC

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

The idea behind Mitsubishi Materials and AIRBNB INC DL 01 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.