Correlation Between Mitsui Chemicals and Air Products

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

Diversification Opportunities for Mitsui Chemicals and Air Products

0.03

Correlation Coefficient

Mitsui Chemicals  Air Products

Significant diversification

The 3 months correlation between Mitsui and Air is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals ADR and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Air Products go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Air Products

Assuming the 90 days horizon Mitsui Chemicals ADR is expected to under-perform the Air Products. In addition to that, Mitsui Chemicals is 2.21 times more volatile than Air Products and. It trades about -0.05 of its total potential returns per unit of risk. Air Products and is currently generating about 0.09 per unit of volatility. If you would invest  24,587  in Air Products and on September 29, 2024 and sell it today you would earn a total of  4,694  from holding Air Products and or generate 19.09% return on investment over 90 days.

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

Mitsui Chemicals ADR  vs.  Air Products and

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.

Air Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Products and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Air Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mitsui Chemicals and Air Products

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

The idea behind Mitsui Chemicals ADR and Air Products and 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.