Correlation Between Mitsui Chemicals and Sociedad Quimica

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

Diversification Opportunities for Mitsui Chemicals and Sociedad Quimica

0.64

Correlation Coefficient

Mitsui Chemicals  Sociedad Quimica

Poor diversification

The 3 months correlation between Mitsui and Sociedad is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals ADR and Sociedad Quimica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Quimica y 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 Sociedad Quimica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Quimica y has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Sociedad Quimica go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Sociedad Quimica

Assuming the 90 days horizon Mitsui Chemicals ADR is expected to generate 0.94 times more return on investment than Sociedad Quimica. However, Mitsui Chemicals ADR is 1.06 times less risky than Sociedad Quimica. It trades about -0.01 of its potential returns per unit of risk. Sociedad Quimica y is currently generating about -0.04 per unit of risk. If you would invest  1,362  in Mitsui Chemicals ADR on October 3, 2024 and sell it today you would lose (332.00) from holding Mitsui Chemicals ADR or give up 24.38% of portfolio value over 90 days.

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

Mitsui Chemicals ADR  vs.  Sociedad Quimica y

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

Sociedad Quimica y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Quimica y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Mitsui Chemicals and Sociedad Quimica

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

The idea behind Mitsui Chemicals ADR and Sociedad Quimica y 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.