Correlation Between NGK Insulators and Mitsubishi Heavy

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

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

Diversification Opportunities for NGK Insulators and Mitsubishi Heavy

0.66

Correlation Coefficient

NGK Insulators  Mitsubishi Heavy

Poor diversification

The 3 months correlation between NGK and Mitsubishi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NGK Insulators and Mitsubishi Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Heavy Ind and NGK Insulators 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 NGK Insulators are associated (or correlated) with Mitsubishi Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Heavy Ind has no effect on the direction of NGK Insulators i.e., NGK Insulators and Mitsubishi Heavy go up and down completely randomly.

Pair Corralation between NGK Insulators and Mitsubishi Heavy

Assuming the 90 days horizon NGK Insulators is expected to under-perform the Mitsubishi Heavy. But the pink sheet apears to be less risky and, when comparing its historical volatility, NGK Insulators is 1.5 times less risky than Mitsubishi Heavy. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Mitsubishi Heavy Industries is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,380  in Mitsubishi Heavy Industries on October 25, 2024 and sell it today you would lose (27.00) from holding Mitsubishi Heavy Industries or give up 1.96% of portfolio value over 90 days.

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

NGK Insulators  vs.  Mitsubishi Heavy Industries

NGK Insulators

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NGK Insulators has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mitsubishi Heavy Ind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NGK Insulators and Mitsubishi Heavy

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

The idea behind NGK Insulators and Mitsubishi Heavy Industries 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 CEOs Directory module to screen CEOs from public companies around the world.