Correlation Between Yokogawa Electric and Mitsubishi Heavy

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

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

Diversification Opportunities for Yokogawa Electric and Mitsubishi Heavy

0.22

Correlation Coefficient

Yokogawa Electric  Mitsubishi Heavy

Modest diversification

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

Pair Corralation between Yokogawa Electric and Mitsubishi Heavy

Assuming the 90 days horizon Yokogawa Electric Corp is expected to generate 1.63 times more return on investment than Mitsubishi Heavy. However, Yokogawa Electric is 1.63 times more volatile than Mitsubishi Heavy Industries. It trades about -0.04 of its potential returns per unit of risk. Mitsubishi Heavy Industries is currently generating about -0.1 per unit of risk. If you would invest  4,671  in Yokogawa Electric Corp on October 9, 2024 and sell it today you would lose (208.00) from holding Yokogawa Electric Corp or give up 4.45% of portfolio value over 90 days.

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

Yokogawa Electric Corp  vs.  Mitsubishi Heavy Industries

Yokogawa Electric Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yokogawa Electric Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Yokogawa Electric 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 Yokogawa Electric and Mitsubishi Heavy

The main advantage of trading using opposite Yokogawa Electric and Mitsubishi Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yokogawa Electric 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 Yokogawa Electric Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.