Correlation Between Mitsui Chemicals and AutoZone

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

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

Diversification Opportunities for Mitsui Chemicals and AutoZone

0.0

Correlation Coefficient

Mitsui Chemicals  AutoZone

Pay attention - limited upside

The 3 months correlation between Mitsui and AutoZone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and AutoZone go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and AutoZone

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the AutoZone. In addition to that, Mitsui Chemicals is 2.01 times more volatile than AutoZone. It trades about -0.01 of its total potential returns per unit of risk. AutoZone is currently generating about 0.13 per unit of volatility. If you would invest  300,100  in AutoZone on October 7, 2024 and sell it today you would earn a total of  14,700  from holding AutoZone or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Mitsui Chemicals  vs.  AutoZone

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.

AutoZone

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, AutoZone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Chemicals and AutoZone

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

The idea behind Mitsui Chemicals and AutoZone 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.