Correlation Between RF Industries and Mitsubishi Electric

Can any of the company-specific risk be diversified away by investing in both RF 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 RF 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 RF Industries and Mitsubishi Electric Corp, you can compare the effects of market volatilities on RF 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 RF Industries with a short position of Mitsubishi Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of RF Industries and Mitsubishi Electric.

Diversification Opportunities for RF Industries and Mitsubishi Electric

0.22

Correlation Coefficient

RF Industries  Mitsubishi Electric

Modest diversification

The 3 months correlation between RFIL and Mitsubishi is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding RF 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 RF 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 RF 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 RF Industries i.e., RF Industries and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between RF Industries and Mitsubishi Electric

Given the investment horizon of 90 days RF Industries is expected to generate 1.19 times more return on investment than Mitsubishi Electric. However, RF Industries is 1.19 times more volatile than Mitsubishi Electric Corp. It trades about 0.03 of its potential returns per unit of risk. Mitsubishi Electric Corp is currently generating about -0.04 per unit of risk. If you would invest  401.00  in RF Industries on September 16, 2024 and sell it today you would earn a total of  4.00  from holding RF Industries or generate 1.0% return on investment over 90 days.

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

RF Industries  vs.  Mitsubishi Electric Corp

RF Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RF Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, RF Industries is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Mitsubishi Electric Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Mitsubishi Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RF Industries and Mitsubishi Electric

The main advantage of trading using opposite RF Industries and Mitsubishi Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RF 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 RF 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.