Correlation Between Mitsui Chemicals and Albemarle Corp

Can any of the company-specific risk be diversified away by investing in both Mitsui Chemicals and Albemarle Corp 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 Albemarle Corp 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 Albemarle Corp, you can compare the effects of market volatilities on Mitsui Chemicals and Albemarle Corp 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 Albemarle Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and Albemarle Corp.

Diversification Opportunities for Mitsui Chemicals and Albemarle Corp

-0.11

Correlation Coefficient

Mitsui Chemicals  Albemarle Corp

Good diversification

The 3 months correlation between Mitsui and Albemarle is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals ADR and Albemarle Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle Corp 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 Albemarle Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle Corp has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Albemarle Corp go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Albemarle Corp

Assuming the 90 days horizon Mitsui Chemicals ADR is expected to under-perform the Albemarle Corp. In addition to that, Mitsui Chemicals is 1.0 times more volatile than Albemarle Corp. It trades about -0.05 of its total potential returns per unit of risk. Albemarle Corp is currently generating about 0.0 per unit of volatility. If you would invest  9,658  in Albemarle Corp on September 29, 2024 and sell it today you would lose (829.00) from holding Albemarle Corp or give up 8.58% of portfolio value over 90 days.

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

Mitsui Chemicals ADR  vs.  Albemarle Corp

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Albemarle Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mitsui Chemicals and Albemarle Corp

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

The idea behind Mitsui Chemicals ADR and Albemarle Corp 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.