Correlation Between Lumia and Mitsubishi Chemical

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

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

Diversification Opportunities for Lumia and Mitsubishi Chemical

-0.64

Correlation Coefficient

Lumia  Mitsubishi Chemical

Excellent diversification

The 3 months correlation between Lumia and Mitsubishi is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Mitsubishi Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Chemical and Lumia 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 Lumia 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 Lumia i.e., Lumia and Mitsubishi Chemical go up and down completely randomly.

Pair Corralation between Lumia and Mitsubishi Chemical

Assuming the 90 days trading horizon Lumia is expected to generate 12.33 times more return on investment than Mitsubishi Chemical. However, Lumia is 12.33 times more volatile than Mitsubishi Chemical Holdings. It trades about 0.04 of its potential returns per unit of risk. Mitsubishi Chemical Holdings is currently generating about 0.02 per unit of risk. If you would invest  0.00  in Lumia on October 26, 2024 and sell it today you would earn a total of  88.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	62.38%
Values	Daily Returns

Lumia  vs.  Mitsubishi Chemical Holdings

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mitsubishi Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsubishi Chemical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lumia and Mitsubishi Chemical

The main advantage of trading using opposite Lumia and Mitsubishi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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 Lumia 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.