Correlation Between Kuraray and Mitsubishi Chemical

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

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

Diversification Opportunities for Kuraray and Mitsubishi Chemical

-0.45

Correlation Coefficient

Kuraray  Mitsubishi Chemical

Very good diversification

The 3 months correlation between Kuraray and Mitsubishi is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kuraray Co and Mitsubishi Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Chemical and Kuraray 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 Kuraray Co are associated (or correlated) with Mitsubishi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Chemical has no effect on the direction of Kuraray i.e., Kuraray and Mitsubishi Chemical go up and down completely randomly.

Pair Corralation between Kuraray and Mitsubishi Chemical

Assuming the 90 days horizon Kuraray Co is expected to generate 2.3 times more return on investment than Mitsubishi Chemical. However, Kuraray is 2.3 times more volatile than Mitsubishi Chemical Holdings. It trades about 0.03 of its potential returns per unit of risk. Mitsubishi Chemical Holdings is currently generating about -0.01 per unit of risk. If you would invest  3,675  in Kuraray Co on November 29, 2024 and sell it today you would earn a total of  40.00  from holding Kuraray Co or generate 1.09% return on investment over 90 days.

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

Kuraray Co  vs.  Mitsubishi Chemical Holdings

Kuraray

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuraray Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Kuraray may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Mitsubishi Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mitsubishi Chemical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Mitsubishi Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kuraray and Mitsubishi Chemical

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

The idea behind Kuraray Co and Mitsubishi Chemical Holdings 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.