Correlation Between Dairy Farm and Mitsui Mining

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

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

Diversification Opportunities for Dairy Farm and Mitsui Mining

0.59

Correlation Coefficient

Dairy Farm  Mitsui Mining

Very weak diversification

The 3 months correlation between Dairy and Mitsui is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Mitsui Mining Smelting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Mining Smelting and Dairy Farm 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 Dairy Farm International are associated (or correlated) with Mitsui Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Mining Smelting has no effect on the direction of Dairy Farm i.e., Dairy Farm and Mitsui Mining go up and down completely randomly.

Pair Corralation between Dairy Farm and Mitsui Mining

Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the Mitsui Mining. In addition to that, Dairy Farm is 1.38 times more volatile than Mitsui Mining Smelting. It trades about -0.04 of its total potential returns per unit of risk. Mitsui Mining Smelting is currently generating about 0.02 per unit of volatility. If you would invest  2,780  in Mitsui Mining Smelting on December 21, 2024 and sell it today you would earn a total of  20.00  from holding Mitsui Mining Smelting or generate 0.72% return on investment over 90 days.

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

Dairy Farm International  vs.  Mitsui Mining Smelting

Dairy Farm International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dairy Farm International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Dairy Farm is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsui Mining Smelting

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Mining Smelting are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mitsui Mining is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Dairy Farm and Mitsui Mining

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

The idea behind Dairy Farm International and Mitsui Mining Smelting 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.