Can any of the company-specific risk be diversified away by investing in both SNDL and Mitsubishi Estate 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 SNDL and Mitsubishi Estate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SNDL Inc and Mitsubishi Estate Co, you can compare the effects of market volatilities on SNDL and Mitsubishi Estate 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 SNDL with a short position of Mitsubishi Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of SNDL and Mitsubishi Estate.
Diversification Opportunities for SNDL and Mitsubishi Estate
The 3 months correlation between SNDL and Mitsubishi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SNDL Inc and Mitsubishi Estate Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Estate and SNDL 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 SNDL Inc are associated (or correlated) with Mitsubishi Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Estate has no effect on the direction of SNDL i.e., SNDL and Mitsubishi Estate go up and down completely randomly.
Pair Corralation between SNDL and Mitsubishi Estate
Given the investment horizon of 90 days SNDL Inc is expected to generate 1.32 times more return on investment than Mitsubishi Estate. However, SNDL is 1.32 times more volatile than Mitsubishi Estate Co. It trades about -0.15 of its potential returns per unit of risk. Mitsubishi Estate Co is currently generating about -0.24 per unit of risk. If you would invest 247.00 in SNDL Inc on March 6, 2024 and sell it today you would lose (30.00) from holding SNDL Inc or give up 12.15% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in SNDL Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, SNDL disclosed solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Estate Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Mitsubishi Estate may actually be approaching a critical reversion point that can send shares even higher in July 2024.