Correlation Between Daito Trust and Mitsui Chemicals

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

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

Diversification Opportunities for Daito Trust and Mitsui Chemicals

-0.04

Correlation Coefficient

Daito Trust  Mitsui Chemicals

Good diversification

The 3 months correlation between Daito and Mitsui is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Daito Trust 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 Daito Trust Construction are associated (or correlated) with Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of Daito Trust i.e., Daito Trust and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Daito Trust and Mitsui Chemicals

Assuming the 90 days horizon Daito Trust Construction is expected to generate 0.77 times more return on investment than Mitsui Chemicals. However, Daito Trust Construction is 1.3 times less risky than Mitsui Chemicals. It trades about 0.03 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.0 per unit of risk. If you would invest  8,800  in Daito Trust Construction on October 22, 2024 and sell it today you would earn a total of  1,400  from holding Daito Trust Construction or generate 15.91% return on investment over 90 days.

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

Daito Trust Construction  vs.  Mitsui Chemicals

Daito Trust Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daito Trust Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Daito Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsui Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Mitsui Chemicals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Daito Trust and Mitsui Chemicals

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

The idea behind Daito Trust Construction and Mitsui Chemicals 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.