Correlation Between Big Yellow and Mitsui Chemicals

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

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

Diversification Opportunities for Big Yellow and Mitsui Chemicals

0.47

Correlation Coefficient

Big Yellow  Mitsui Chemicals

Very weak diversification

The 3 months correlation between Big and Mitsui is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Big Yellow Group and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Big Yellow 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 Big Yellow Group 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 Big Yellow i.e., Big Yellow and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Big Yellow and Mitsui Chemicals

Assuming the 90 days horizon Big Yellow Group is expected to generate 0.63 times more return on investment than Mitsui Chemicals. However, Big Yellow Group is 1.6 times less risky than Mitsui Chemicals. It trades about 0.23 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.13 per unit of risk. If you would invest  2,768  in Big Yellow Group on October 5, 2024 and sell it today you would earn a total of  111.00  from holding Big Yellow Group or generate 4.01% return on investment over 90 days.

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

Big Yellow Group  vs.  Mitsui Chemicals

Big Yellow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Yellow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big Yellow is not utilizing all of its potentials. The current 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 latest fragile 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 Big Yellow and Mitsui Chemicals

The main advantage of trading using opposite Big Yellow and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Yellow 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 Big Yellow Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.