Correlation Between Oversea Chinese and Mitsubishi Logistics

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

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

Diversification Opportunities for Oversea Chinese and Mitsubishi Logistics

0.12

Correlation Coefficient

Oversea Chinese  Mitsubishi Logistics

Average diversification

The 3 months correlation between Oversea and Mitsubishi is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Oversea Chinese Banking and Mitsubishi Logistics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Logistics and Oversea Chinese 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 Oversea Chinese Banking are associated (or correlated) with Mitsubishi Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Logistics has no effect on the direction of Oversea Chinese i.e., Oversea Chinese and Mitsubishi Logistics go up and down completely randomly.

Pair Corralation between Oversea Chinese and Mitsubishi Logistics

Assuming the 90 days trading horizon Oversea Chinese Banking is expected to generate 0.43 times more return on investment than Mitsubishi Logistics. However, Oversea Chinese Banking is 2.31 times less risky than Mitsubishi Logistics. It trades about 0.03 of its potential returns per unit of risk. Mitsubishi Logistics is currently generating about -0.04 per unit of risk. If you would invest  1,183  in Oversea Chinese Banking on December 28, 2024 and sell it today you would earn a total of  20.00  from holding Oversea Chinese Banking or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Oversea Chinese Banking  vs.  Mitsubishi Logistics

Oversea Chinese Banking

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Oversea Chinese is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsubishi Logistics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mitsubishi Logistics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Oversea Chinese and Mitsubishi Logistics

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

The idea behind Oversea Chinese Banking and Mitsubishi Logistics 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.