Correlation Between Mitsui Chemicals and Major Drilling

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Can any of the company-specific risk be diversified away by investing in both Mitsui Chemicals and Major Drilling 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 Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsui Chemicals and Major Drilling Group, you can compare the effects of market volatilities on Mitsui Chemicals and Major Drilling 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 Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and Major Drilling.

Diversification Opportunities for Mitsui Chemicals and Major Drilling

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Mitsui and Major is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group 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 are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Major Drilling go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Major Drilling

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Major Drilling. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Chemicals is 1.24 times less risky than Major Drilling. The stock trades about -0.04 of its potential returns per unit of risk. The Major Drilling Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  610.00  in Major Drilling Group on October 2, 2024 and sell it today you would lose (65.00) from holding Major Drilling Group or give up 10.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Mitsui Chemicals  vs.  Major Drilling Group

 Performance 
       Timeline  
Mitsui Chemicals 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Major Drilling Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Major Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsui Chemicals and Major Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mitsui Chemicals and Major Drilling

The main advantage of trading using opposite Mitsui Chemicals and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.
The idea behind Mitsui Chemicals and Major Drilling Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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