Correlation Between Mitsubishi UFJ and Boralex

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

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

Diversification Opportunities for Mitsubishi UFJ and Boralex

-0.64

Correlation Coefficient

Mitsubishi UFJ  Boralex

Excellent diversification

The 3 months correlation between Mitsubishi and Boralex is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex and Mitsubishi UFJ 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 UFJ Financial are associated (or correlated) with Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Boralex go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Boralex

Assuming the 90 days horizon Mitsubishi UFJ Financial is expected to generate 1.67 times more return on investment than Boralex. However, Mitsubishi UFJ is 1.67 times more volatile than Boralex. It trades about -0.04 of its potential returns per unit of risk. Boralex is currently generating about -0.38 per unit of risk. If you would invest  1,002  in Mitsubishi UFJ Financial on January 29, 2024 and sell it today you would lose (12.00) from holding Mitsubishi UFJ Financial or give up 1.2% of portfolio value over 90 days.

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

Mitsubishi UFJ Financial  vs.  Boralex

Mitsubishi UFJ Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward-looking indicators, Mitsubishi UFJ may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mitsubishi UFJ and Boralex

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

The idea behind Mitsubishi UFJ Financial and Boralex 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.