Correlation Between Mitsui Chemicals and Chemours

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

Diversification Opportunities for Mitsui Chemicals and Chemours

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Mitsui and Chemours is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals ADR and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Chemours go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Chemours

Assuming the 90 days horizon Mitsui Chemicals ADR is expected to generate 2.8 times more return on investment than Chemours. However, Mitsui Chemicals is 2.8 times more volatile than Chemours Co. It trades about -0.04 of its potential returns per unit of risk. Chemours Co is currently generating about -0.48 per unit of risk. If you would invest  1,123  in Mitsui Chemicals ADR on September 28, 2024 and sell it today you would lose (93.00) from holding Mitsui Chemicals ADR or give up 8.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Mitsui Chemicals ADR  vs.  Chemours Co

 Performance 
       Timeline  
Mitsui Chemicals ADR 

Risk-Adjusted Performance

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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.
Chemours 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Mitsui Chemicals and Chemours Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mitsui Chemicals and Chemours

The main advantage of trading using opposite Mitsui Chemicals and Chemours positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals position performs unexpectedly, Chemours 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 Chemours will offset losses from the drop in Chemours' long position.
The idea behind Mitsui Chemicals ADR and Chemours Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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