Correlation Between Mitsui ES and ZoomLion

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

By analyzing existing cross correlation between Mitsui ES Holdings and ZoomLion, you can compare the effects of market volatilities on Mitsui ES and ZoomLion 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 Mitsui ES with a short position of ZoomLion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui ES and ZoomLion.

Diversification Opportunities for Mitsui ES and ZoomLion

0.69

Correlation Coefficient

Mitsui ES  ZoomLion

Poor diversification

The 3 months correlation between Mitsui and ZoomLion is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui ES Holdings and ZoomLion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZoomLion and Mitsui ES 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 Mitsui ES Holdings are associated (or correlated) with ZoomLion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZoomLion has no effect on the direction of Mitsui ES i.e., Mitsui ES and ZoomLion go up and down completely randomly.

Pair Corralation between Mitsui ES and ZoomLion

Assuming the 90 days horizon Mitsui ES Holdings is expected to generate 2.5 times more return on investment than ZoomLion. However, Mitsui ES is 2.5 times more volatile than ZoomLion. It trades about 0.14 of its potential returns per unit of risk. ZoomLion is currently generating about 0.18 per unit of risk. If you would invest  778.00  in Mitsui ES Holdings on February 2, 2024 and sell it today you would earn a total of  299.00  from holding Mitsui ES Holdings or generate 38.43% return on investment over 90 days.

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

Mitsui ES Holdings  vs.  ZoomLion

Mitsui ES Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui ES Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Mitsui ES reported solid returns over the last few months and may actually be approaching a breakup point.

ZoomLion

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ZoomLion are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, ZoomLion showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui ES and ZoomLion

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

The idea behind Mitsui ES Holdings and ZoomLion 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.