Correlation Between Mitsui Chemicals and American Public

Can any of the company-specific risk be diversified away by investing in both Mitsui Chemicals and American Public 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 American Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mitsui Chemicals and American Public Education, you can compare the effects of market volatilities on Mitsui Chemicals and American Public 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 American Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and American Public.

Diversification Opportunities for Mitsui Chemicals and American Public

-0.54

Correlation Coefficient

Mitsui Chemicals  American Public

Excellent diversification

The 3 months correlation between Mitsui and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and American Public Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Public Education 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 American Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Public Education has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and American Public go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and American Public

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 10.74 times less return on investment than American Public. But when comparing it to its historical volatility, Mitsui Chemicals is 2.86 times less risky than American Public. It trades about 0.01 of its potential returns per unit of risk. American Public Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,160  in American Public Education on October 5, 2024 and sell it today you would earn a total of  900.00  from holding American Public Education or generate 77.59% return on investment over 90 days.

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

Mitsui Chemicals  vs.  American Public Education

Mitsui Chemicals

Risk-Adjusted Performance

0 of 100

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 fragile 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.

American Public Education

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days American Public Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Chemicals and American Public

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

The idea behind Mitsui Chemicals and American Public Education 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.