Correlation Between Mitsui Chemicals and Asia Carbon

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

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

Diversification Opportunities for Mitsui Chemicals and Asia Carbon

0.0

Correlation Coefficient

Mitsui Chemicals  Asia Carbon

Pay attention - limited upside

The 3 months correlation between Mitsui and Asia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals ADR and Asia Carbon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Carbon Industries and Mitsui Chemicals 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 Mitsui Chemicals ADR are associated (or correlated) with Asia Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Carbon Industries has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Asia Carbon go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Asia Carbon

If you would invest  902.00  in Mitsui Chemicals ADR on December 20, 2024 and sell it today you would earn a total of  231.00  from holding Mitsui Chemicals ADR or generate 25.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Mitsui Chemicals ADR  vs.  Asia Carbon Industries

Mitsui Chemicals ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mitsui Chemicals showed solid returns over the last few months and may actually be approaching a breakup point.

Asia Carbon Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asia Carbon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Asia Carbon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mitsui Chemicals and Asia Carbon

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

The idea behind Mitsui Chemicals ADR and Asia Carbon Industries 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.