Correlation Between Retail Estates and MITSUBISHI STEEL

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

By analyzing existing cross correlation between Retail Estates NV and MITSUBISHI STEEL MFG, you can compare the effects of market volatilities on Retail Estates and MITSUBISHI 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 Retail Estates with a short position of MITSUBISHI STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and MITSUBISHI STEEL.

Diversification Opportunities for Retail Estates and MITSUBISHI STEEL

-0.13

Correlation Coefficient

Retail Estates  MITSUBISHI STEEL

Good diversification

The 3 months correlation between Retail and MITSUBISHI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and MITSUBISHI STEEL MFG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITSUBISHI STEEL MFG and Retail Estates 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 Retail Estates NV are associated (or correlated) with MITSUBISHI STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITSUBISHI STEEL MFG has no effect on the direction of Retail Estates i.e., Retail Estates and MITSUBISHI STEEL go up and down completely randomly.

Pair Corralation between Retail Estates and MITSUBISHI STEEL

Assuming the 90 days horizon Retail Estates NV is expected to under-perform the MITSUBISHI STEEL. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 1.19 times less risky than MITSUBISHI STEEL. The stock trades about -0.25 of its potential returns per unit of risk. The MITSUBISHI STEEL MFG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  830.00  in MITSUBISHI STEEL MFG on September 13, 2024 and sell it today you would earn a total of  25.00  from holding MITSUBISHI STEEL MFG or generate 3.01% return on investment over 90 days.

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

Retail Estates NV  vs.  MITSUBISHI STEEL MFG

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MITSUBISHI STEEL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Retail Estates and MITSUBISHI STEEL

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

The idea behind Retail Estates NV and MITSUBISHI STEEL MFG 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.