Correlation Between Sumitomo Mitsui and Mitsubishi Estate

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

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

Diversification Opportunities for Sumitomo Mitsui and Mitsubishi Estate

-0.1

Correlation Coefficient

Sumitomo Mitsui  Mitsubishi Estate

Good diversification

The 3 months correlation between Sumitomo and Mitsubishi is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Trust and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate and Sumitomo Mitsui 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 Sumitomo Mitsui Trust are associated (or correlated) with Mitsubishi Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Estate has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Mitsubishi Estate go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Mitsubishi Estate

Assuming the 90 days horizon Sumitomo Mitsui Trust is expected to generate 1.02 times more return on investment than Mitsubishi Estate. However, Sumitomo Mitsui is 1.02 times more volatile than Mitsubishi Estate Co. It trades about 0.04 of its potential returns per unit of risk. Mitsubishi Estate Co is currently generating about -0.13 per unit of risk. If you would invest  495.00  in Sumitomo Mitsui Trust on September 14, 2024 and sell it today you would earn a total of  15.00  from holding Sumitomo Mitsui Trust or generate 3.03% return on investment over 90 days.

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

Sumitomo Mitsui Trust  vs.  Mitsubishi Estate Co

Sumitomo Mitsui Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mitsubishi Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Estate Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sumitomo Mitsui and Mitsubishi Estate

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

The idea behind Sumitomo Mitsui Trust and Mitsubishi Estate Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.