Correlation Between Powell Industries and Mitsubishi Electric

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

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

Diversification Opportunities for Powell Industries and Mitsubishi Electric

0.57

Correlation Coefficient

Powell Industries  Mitsubishi Electric

Very weak diversification

The 3 months correlation between Powell and Mitsubishi is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Powell Industries and Mitsubishi Electric Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric Corp and Powell Industries 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 Powell Industries are associated (or correlated) with Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric Corp has no effect on the direction of Powell Industries i.e., Powell Industries and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between Powell Industries and Mitsubishi Electric

Given the investment horizon of 90 days Powell Industries is expected to under-perform the Mitsubishi Electric. In addition to that, Powell Industries is 2.97 times more volatile than Mitsubishi Electric Corp. It trades about -0.2 of its total potential returns per unit of risk. Mitsubishi Electric Corp is currently generating about -0.11 per unit of volatility. If you would invest  3,530  in Mitsubishi Electric Corp on December 5, 2024 and sell it today you would lose (350.00) from holding Mitsubishi Electric Corp or give up 9.92% of portfolio value over 90 days.

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

Powell Industries  vs.  Mitsubishi Electric Corp

Powell Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Powell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mitsubishi Electric Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mitsubishi Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Powell Industries and Mitsubishi Electric

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

The idea behind Powell Industries and Mitsubishi Electric Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.