Correlation Between China BlueChemical and Mitsubishi Materials

Can any of the company-specific risk be diversified away by investing in both China BlueChemical and Mitsubishi Materials 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 China BlueChemical and Mitsubishi Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for China BlueChemical and Mitsubishi Materials

-0.21

Correlation Coefficient

China BlueChemical  Mitsubishi Materials

Very good diversification

The 3 months correlation between China and Mitsubishi is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and Mitsubishi Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Materials and China BlueChemical 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 China BlueChemical are associated (or correlated) with Mitsubishi Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Materials has no effect on the direction of China BlueChemical i.e., China BlueChemical and Mitsubishi Materials go up and down completely randomly.

Pair Corralation between China BlueChemical and Mitsubishi Materials

Assuming the 90 days horizon China BlueChemical is expected to generate 5.0 times less return on investment than Mitsubishi Materials. In addition to that, China BlueChemical is 1.97 times more volatile than Mitsubishi Materials. It trades about 0.02 of its total potential returns per unit of risk. Mitsubishi Materials is currently generating about 0.15 per unit of volatility. If you would invest  1,390  in Mitsubishi Materials on December 22, 2024 and sell it today you would earn a total of  210.00  from holding Mitsubishi Materials or generate 15.11% return on investment over 90 days.

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

China BlueChemical  vs.  Mitsubishi Materials

China BlueChemical

Risk-Adjusted Performance

Very Weak

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

Mitsubishi Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi Materials are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking indicators, Mitsubishi Materials exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China BlueChemical and Mitsubishi Materials

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

The idea behind China BlueChemical and Mitsubishi Materials 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.