Correlation Between Mitsui Chemicals and Advanced Micro

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

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

Diversification Opportunities for Mitsui Chemicals and Advanced Micro

0.69

Correlation Coefficient

Mitsui Chemicals  Advanced Micro

Poor diversification

The 3 months correlation between Mitsui and Advanced is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Advanced Micro go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Advanced Micro

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 12.99 times less return on investment than Advanced Micro. But when comparing it to its historical volatility, Mitsui Chemicals is 1.62 times less risky than Advanced Micro. It trades about 0.01 of its potential returns per unit of risk. Advanced Micro Devices is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,741  in Advanced Micro Devices on October 23, 2024 and sell it today you would earn a total of  4,119  from holding Advanced Micro Devices or generate 53.21% return on investment over 90 days.

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

Mitsui Chemicals  vs.  Advanced Micro Devices

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mitsui Chemicals and Advanced Micro

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

The idea behind Mitsui Chemicals and Advanced Micro Devices 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.