Correlation Between Murata Manufacturing and Mitsubishi Electric

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

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

Diversification Opportunities for Murata Manufacturing and Mitsubishi Electric

-0.75

Correlation Coefficient

Murata Manufacturing  Mitsubishi Electric

Pay attention - limited upside

The 3 months correlation between Murata and Mitsubishi is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing Co and Mitsubishi Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Electric and Murata Manufacturing 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 Murata Manufacturing Co are associated (or correlated) with Mitsubishi Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Electric has no effect on the direction of Murata Manufacturing i.e., Murata Manufacturing and Mitsubishi Electric go up and down completely randomly.

Pair Corralation between Murata Manufacturing and Mitsubishi Electric

Assuming the 90 days trading horizon Murata Manufacturing is expected to generate 8.68 times less return on investment than Mitsubishi Electric. But when comparing it to its historical volatility, Murata Manufacturing Co is 1.28 times less risky than Mitsubishi Electric. It trades about 0.01 of its potential returns per unit of risk. Mitsubishi Electric is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  919.00  in Mitsubishi Electric on September 19, 2024 and sell it today you would earn a total of  740.00  from holding Mitsubishi Electric or generate 80.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Murata Manufacturing Co  vs.  Mitsubishi Electric

Murata Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murata Manufacturing Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mitsubishi Electric

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Electric are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Mitsubishi Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Murata Manufacturing and Mitsubishi Electric

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

The idea behind Murata Manufacturing Co and Mitsubishi Electric 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..