Correlation Between Fukuyama Transporting and Mitsui Chemicals

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

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

Diversification Opportunities for Fukuyama Transporting and Mitsui Chemicals

0.55

Correlation Coefficient

Fukuyama Transporting  Mitsui Chemicals

Very weak diversification

The 3 months correlation between Fukuyama and Mitsui is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Fukuyama Transporting Co and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Fukuyama Transporting 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 Fukuyama Transporting Co 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 Fukuyama Transporting i.e., Fukuyama Transporting and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Fukuyama Transporting and Mitsui Chemicals

Assuming the 90 days horizon Fukuyama Transporting is expected to generate 1.64 times less return on investment than Mitsui Chemicals. But when comparing it to its historical volatility, Fukuyama Transporting Co is 1.0 times less risky than Mitsui Chemicals. It trades about 0.06 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,040  in Mitsui Chemicals on December 23, 2024 and sell it today you would earn a total of  160.00  from holding Mitsui Chemicals or generate 7.84% return on investment over 90 days.

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

Fukuyama Transporting Co  vs.  Mitsui Chemicals

Fukuyama Transporting

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fukuyama Transporting Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fukuyama Transporting 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Mitsui Chemicals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fukuyama Transporting and Mitsui Chemicals

The main advantage of trading using opposite Fukuyama Transporting and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fukuyama Transporting 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 Fukuyama Transporting Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.