Correlation Between KRAKATAU STEEL and Mitsubishi Gas

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

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

Diversification Opportunities for KRAKATAU STEEL and Mitsubishi Gas

-0.01

Correlation Coefficient

KRAKATAU STEEL  Mitsubishi Gas

Good diversification

The 3 months correlation between KRAKATAU and Mitsubishi is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Mitsubishi Gas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Gas Chemical and KRAKATAU STEEL 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 KRAKATAU STEEL B are associated (or correlated) with Mitsubishi Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Gas Chemical has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Mitsubishi Gas go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Mitsubishi Gas

Assuming the 90 days trading horizon KRAKATAU STEEL B is expected to generate 3.22 times more return on investment than Mitsubishi Gas. However, KRAKATAU STEEL is 3.22 times more volatile than Mitsubishi Gas Chemical. It trades about 0.15 of its potential returns per unit of risk. Mitsubishi Gas Chemical is currently generating about 0.03 per unit of risk. If you would invest  0.40  in KRAKATAU STEEL B on September 17, 2024 and sell it today you would earn a total of  0.20  from holding KRAKATAU STEEL B or generate 50.0% return on investment over 90 days.

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

KRAKATAU STEEL B   vs.  Mitsubishi Gas Chemical

KRAKATAU STEEL B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi Gas Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Gas Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mitsubishi Gas is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KRAKATAU STEEL and Mitsubishi Gas

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

The idea behind KRAKATAU STEEL B and Mitsubishi Gas Chemical 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.