Correlation Between SPECTRAL MEDICAL and Mitsubishi

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

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

Diversification Opportunities for SPECTRAL MEDICAL and Mitsubishi

0.48

Correlation Coefficient

SPECTRAL MEDICAL  Mitsubishi

Very weak diversification

The 3 months correlation between SPECTRAL and Mitsubishi is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding SPECTRAL MEDICAL and Mitsubishi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi and SPECTRAL MEDICAL 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 SPECTRAL MEDICAL are associated (or correlated) with Mitsubishi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi has no effect on the direction of SPECTRAL MEDICAL i.e., SPECTRAL MEDICAL and Mitsubishi go up and down completely randomly.

Pair Corralation between SPECTRAL MEDICAL and Mitsubishi

Assuming the 90 days horizon SPECTRAL MEDICAL is expected to generate 1.85 times more return on investment than Mitsubishi. However, SPECTRAL MEDICAL is 1.85 times more volatile than Mitsubishi. It trades about 0.14 of its potential returns per unit of risk. Mitsubishi is currently generating about 0.1 per unit of risk. If you would invest  30.00  in SPECTRAL MEDICAL on December 23, 2024 and sell it today you would earn a total of  12.00  from holding SPECTRAL MEDICAL or generate 40.0% return on investment over 90 days.

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

SPECTRAL MEDICAL  vs.  Mitsubishi

SPECTRAL MEDICAL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPECTRAL MEDICAL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SPECTRAL MEDICAL reported solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mitsubishi reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPECTRAL MEDICAL and Mitsubishi

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

The idea behind SPECTRAL MEDICAL and Mitsubishi 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.