Correlation Between Mitsubishi Heavy and Siemens AG

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Can any of the company-specific risk be diversified away by investing in both Mitsubishi Heavy and Siemens AG 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 Mitsubishi Heavy and Siemens AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi Heavy Industries and Siemens AG ADR, you can compare the effects of market volatilities on Mitsubishi Heavy and Siemens AG 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 Mitsubishi Heavy with a short position of Siemens AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Heavy and Siemens AG.

Diversification Opportunities for Mitsubishi Heavy and Siemens AG

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between Mitsubishi and Siemens is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Heavy Industries and Siemens AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siemens AG ADR and Mitsubishi Heavy 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 Mitsubishi Heavy Industries are associated (or correlated) with Siemens AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siemens AG ADR has no effect on the direction of Mitsubishi Heavy i.e., Mitsubishi Heavy and Siemens AG go up and down completely randomly.

Pair Corralation between Mitsubishi Heavy and Siemens AG

If you would invest  7,835  in Siemens AG ADR on December 29, 2023 and sell it today you would earn a total of  0.00  from holding Siemens AG ADR or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy4.35%
ValuesDaily Returns

Mitsubishi Heavy Industries  vs.  Siemens AG ADR

 Performance 
       Timeline  
Mitsubishi Heavy Ind 

Risk-Adjusted Performance

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Over the last 90 days Mitsubishi Heavy Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Siemens AG ADR 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Siemens AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Siemens AG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mitsubishi Heavy and Siemens AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mitsubishi Heavy and Siemens AG

The main advantage of trading using opposite Mitsubishi Heavy and Siemens AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Heavy position performs unexpectedly, Siemens AG 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 Siemens AG will offset losses from the drop in Siemens AG's long position.
The idea behind Mitsubishi Heavy Industries and Siemens AG ADR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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