Correlation Between Siemens AG and Mitsubishi Heavy

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

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

Diversification Opportunities for Siemens AG and Mitsubishi Heavy

-0.36

Correlation Coefficient

Siemens AG  Mitsubishi Heavy

Very good diversification

The 3 months correlation between Siemens and Mitsubishi is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Siemens AG Class 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 Siemens AG 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 Siemens AG Class 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 Siemens AG i.e., Siemens AG and Mitsubishi Heavy go up and down completely randomly.

Pair Corralation between Siemens AG and Mitsubishi Heavy

Assuming the 90 days horizon Siemens AG is expected to generate 2.25 times less return on investment than Mitsubishi Heavy. But when comparing it to its historical volatility, Siemens AG Class is 2.04 times less risky than Mitsubishi Heavy. It trades about 0.08 of its potential returns per unit of risk. Mitsubishi Heavy Industries is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  883.00  in Mitsubishi Heavy Industries on February 5, 2024 and sell it today you would earn a total of  41.00  from holding Mitsubishi Heavy Industries or generate 4.64% return on investment over 90 days.

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

Siemens AG Class  vs.  Mitsubishi Heavy Industries

Siemens AG Class

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siemens AG Class are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Siemens AG may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Mitsubishi Heavy Ind

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Heavy Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Mitsubishi Heavy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siemens AG and Mitsubishi Heavy

The main advantage of trading using opposite Siemens AG and Mitsubishi Heavy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siemens AG 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 Siemens AG Class 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.