Correlation Between APPLIED MATERIALS and Mitsui Chemicals

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

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

Diversification Opportunities for APPLIED MATERIALS and Mitsui Chemicals

0.7

Correlation Coefficient

APPLIED MATERIALS  Mitsui Chemicals

Poor diversification

The 3 months correlation between APPLIED and Mitsui is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and APPLIED MATERIALS 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 APPLIED MATERIALS 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 APPLIED MATERIALS i.e., APPLIED MATERIALS and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and Mitsui Chemicals

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.38 times more return on investment than Mitsui Chemicals. However, APPLIED MATERIALS is 1.38 times more volatile than Mitsui Chemicals. It trades about 0.05 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.05 per unit of risk. If you would invest  13,761  in APPLIED MATERIALS on October 9, 2024 and sell it today you would earn a total of  3,435  from holding APPLIED MATERIALS or generate 24.96% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  Mitsui Chemicals

APPLIED MATERIALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days APPLIED MATERIALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 latest uncertain performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with APPLIED MATERIALS and Mitsui Chemicals

The main advantage of trading using opposite APPLIED MATERIALS and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS 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 APPLIED MATERIALS 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.