Correlation Between Mitsubishi UFJ and Victory Bancorp

Can any of the company-specific risk be diversified away by investing in both Mitsubishi UFJ and Victory Bancorp 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 Victory Bancorp 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 The Victory Bancorp, you can compare the effects of market volatilities on Mitsubishi UFJ and Victory Bancorp 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 Victory Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi UFJ and Victory Bancorp.

Diversification Opportunities for Mitsubishi UFJ and Victory Bancorp

-0.39

Correlation Coefficient

Mitsubishi UFJ  Victory Bancorp

Very good diversification

The 3 months correlation between Mitsubishi and Victory is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi UFJ Financial and The Victory Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Bancorp 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 Victory Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Bancorp has no effect on the direction of Mitsubishi UFJ i.e., Mitsubishi UFJ and Victory Bancorp go up and down completely randomly.

Pair Corralation between Mitsubishi UFJ and Victory Bancorp

Assuming the 90 days horizon Mitsubishi UFJ Financial is expected to generate 1.14 times more return on investment than Victory Bancorp. However, Mitsubishi UFJ is 1.14 times more volatile than The Victory Bancorp. It trades about 0.11 of its potential returns per unit of risk. The Victory Bancorp is currently generating about -0.05 per unit of risk. If you would invest  817.00  in Mitsubishi UFJ Financial on January 20, 2024 and sell it today you would earn a total of  153.00  from holding Mitsubishi UFJ Financial or generate 18.73% return on investment over 90 days.

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

Mitsubishi UFJ Financial  vs.  The Victory Bancorp

Mitsubishi UFJ Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, Mitsubishi UFJ reported solid returns over the last few months and may actually be approaching a breakup point.

Victory Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Victory Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Victory Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mitsubishi UFJ and Victory Bancorp

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

The idea behind Mitsubishi UFJ Financial and The Victory Bancorp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..