Correlation Between Linde Plc and Mitsui Chemicals

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

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

Diversification Opportunities for Linde Plc and Mitsui Chemicals

0.79

Correlation Coefficient

Linde Plc  Mitsui Chemicals

Poor diversification

The 3 months correlation between Linde and Mitsui is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Linde plc Ordinary and Mitsui Chemicals ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals ADR and Linde Plc 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 Linde plc Ordinary 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 ADR has no effect on the direction of Linde Plc i.e., Linde Plc and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Linde Plc and Mitsui Chemicals

Considering the 90-day investment horizon Linde plc Ordinary is expected to under-perform the Mitsui Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Linde plc Ordinary is 7.78 times less risky than Mitsui Chemicals. The stock trades about -0.49 of its potential returns per unit of risk. The Mitsui Chemicals ADR is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,147  in Mitsui Chemicals ADR on October 6, 2024 and sell it today you would lose (117.00) from holding Mitsui Chemicals ADR or give up 10.2% of portfolio value over 90 days.

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

Linde plc Ordinary  vs.  Mitsui Chemicals ADR

Linde plc Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc Ordinary 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Mitsui Chemicals ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Linde Plc and Mitsui Chemicals

The main advantage of trading using opposite Linde Plc and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linde Plc 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 Linde plc Ordinary and Mitsui Chemicals ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.