Correlation Between Wartsila Oyj and Mitsubishi Heavy

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

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

Diversification Opportunities for Wartsila Oyj and Mitsubishi Heavy

0.0

Correlation Coefficient

Wartsila Oyj  Mitsubishi Heavy

Pay attention - limited upside

The 3 months correlation between Wartsila and Mitsubishi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Mitsubishi Heavy Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Heavy Ind and Wartsila Oyj 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 Wartsila Oyj Abp are associated (or correlated) with Mitsubishi Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Heavy Ind has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Mitsubishi Heavy go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Mitsubishi Heavy

Assuming the 90 days horizon Wartsila Oyj Abp is expected to generate 2.21 times more return on investment than Mitsubishi Heavy. However, Wartsila Oyj is 2.21 times more volatile than Mitsubishi Heavy Industries. It trades about 0.14 of its potential returns per unit of risk. Mitsubishi Heavy Industries is currently generating about -0.2 per unit of risk. If you would invest  365.00  in Wartsila Oyj Abp on October 12, 2024 and sell it today you would earn a total of  43.00  from holding Wartsila Oyj Abp or generate 11.78% return on investment over 90 days.

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

Wartsila Oyj Abp  vs.  Mitsubishi Heavy Industries

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Wartsila Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mitsubishi Heavy Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Heavy Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mitsubishi Heavy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Wartsila Oyj and Mitsubishi Heavy

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

The idea behind Wartsila Oyj Abp and Mitsubishi Heavy Industries 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.