Correlation Between Mitsubishi Materials and ANGANG STEEL

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

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

Diversification Opportunities for Mitsubishi Materials and ANGANG STEEL

0.08

Correlation Coefficient

Mitsubishi Materials  ANGANG STEEL

Significant diversification

The 3 months correlation between Mitsubishi and ANGANG is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Materials and ANGANG STEEL H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANGANG STEEL H 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 ANGANG STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANGANG STEEL H has no effect on the direction of Mitsubishi Materials i.e., Mitsubishi Materials and ANGANG STEEL go up and down completely randomly.

Pair Corralation between Mitsubishi Materials and ANGANG STEEL

Assuming the 90 days trading horizon Mitsubishi Materials is expected to generate 0.7 times more return on investment than ANGANG STEEL. However, Mitsubishi Materials is 1.44 times less risky than ANGANG STEEL. It trades about -0.12 of its potential returns per unit of risk. ANGANG STEEL H is currently generating about -0.09 per unit of risk. If you would invest  1,510  in Mitsubishi Materials on October 11, 2024 and sell it today you would lose (70.00) from holding Mitsubishi Materials or give up 4.64% of portfolio value over 90 days.

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

Mitsubishi Materials  vs.  ANGANG STEEL H

Mitsubishi Materials

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ANGANG STEEL H

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Mitsubishi Materials and ANGANG STEEL

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

The idea behind Mitsubishi Materials and ANGANG STEEL H 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.