Correlation Between Willis Lease and Mitsubishi UFJ

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

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

Diversification Opportunities for Willis Lease and Mitsubishi UFJ

0.02

Correlation Coefficient

Willis Lease  Mitsubishi UFJ

Significant diversification

The 3 months correlation between Willis and Mitsubishi is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Willis Lease Finance and Mitsubishi UFJ Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Lease and Willis Lease 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 Willis Lease Finance are associated (or correlated) with Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Lease has no effect on the direction of Willis Lease i.e., Willis Lease and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Willis Lease and Mitsubishi UFJ

Given the investment horizon of 90 days Willis Lease Finance is expected to under-perform the Mitsubishi UFJ. But the stock apears to be less risky and, when comparing its historical volatility, Willis Lease Finance is 1.0 times less risky than Mitsubishi UFJ. The stock trades about -0.03 of its potential returns per unit of risk. The Mitsubishi UFJ Lease is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,286  in Mitsubishi UFJ Lease on December 21, 2024 and sell it today you would earn a total of  170.00  from holding Mitsubishi UFJ Lease or generate 13.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	83.33%
Values	Daily Returns

Willis Lease Finance  vs.  Mitsubishi UFJ Lease

Willis Lease Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willis Lease Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Willis Lease is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Mitsubishi UFJ Lease

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Lease are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Mitsubishi UFJ showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willis Lease and Mitsubishi UFJ

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

The idea behind Willis Lease Finance and Mitsubishi UFJ Lease 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.