Correlation Between ASPEN TECHINC and MITSUBISHI STEEL

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

By analyzing existing cross correlation between ASPEN TECHINC DL and MITSUBISHI STEEL MFG, you can compare the effects of market volatilities on ASPEN TECHINC and MITSUBISHI STEEL 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 ASPEN TECHINC with a short position of MITSUBISHI STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASPEN TECHINC and MITSUBISHI STEEL.

Diversification Opportunities for ASPEN TECHINC and MITSUBISHI STEEL

0.43

Correlation Coefficient

ASPEN TECHINC  MITSUBISHI STEEL

Very weak diversification

The 3 months correlation between ASPEN and MITSUBISHI is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL and MITSUBISHI STEEL MFG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITSUBISHI STEEL MFG and ASPEN TECHINC 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 ASPEN TECHINC DL are associated (or correlated) with MITSUBISHI STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITSUBISHI STEEL MFG has no effect on the direction of ASPEN TECHINC i.e., ASPEN TECHINC and MITSUBISHI STEEL go up and down completely randomly.

Pair Corralation between ASPEN TECHINC and MITSUBISHI STEEL

Assuming the 90 days horizon ASPEN TECHINC is expected to generate 1.25 times less return on investment than MITSUBISHI STEEL. But when comparing it to its historical volatility, ASPEN TECHINC DL is 2.39 times less risky than MITSUBISHI STEEL. It trades about 0.25 of its potential returns per unit of risk. MITSUBISHI STEEL MFG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  930.00  in MITSUBISHI STEEL MFG on October 25, 2024 and sell it today you would earn a total of  30.00  from holding MITSUBISHI STEEL MFG or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

ASPEN TECHINC DL  vs.  MITSUBISHI STEEL MFG

ASPEN TECHINC DL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, MITSUBISHI STEEL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASPEN TECHINC and MITSUBISHI STEEL

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

The idea behind ASPEN TECHINC DL and MITSUBISHI STEEL MFG 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.