Correlation Between Mitsui Chemicals and Liberty Broadband

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

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

Diversification Opportunities for Mitsui Chemicals and Liberty Broadband

0.55

Correlation Coefficient

Mitsui Chemicals  Liberty Broadband

Very weak diversification

The 3 months correlation between Mitsui and Liberty is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Liberty Broadband in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Liberty Broadband go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Liberty Broadband

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 0.61 times more return on investment than Liberty Broadband. However, Mitsui Chemicals is 1.63 times less risky than Liberty Broadband. It trades about 0.0 of its potential returns per unit of risk. Liberty Broadband is currently generating about -0.01 per unit of risk. If you would invest  2,080  in Mitsui Chemicals on October 25, 2024 and sell it today you would lose (20.00) from holding Mitsui Chemicals or give up 0.96% of portfolio value over 90 days.

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

Mitsui Chemicals  vs.  Liberty Broadband

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 rather sound forward indicators, Mitsui Chemicals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Liberty Broadband

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Broadband has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Liberty Broadband is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsui Chemicals and Liberty Broadband

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

The idea behind Mitsui Chemicals and Liberty Broadband 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.