Correlation Between Mitsui Chemicals and Metro AG

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

Diversification Opportunities for Mitsui Chemicals and Metro AG

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Mitsui and Metro is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Metro AG go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Metro AG

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 1.17 times more return on investment than Metro AG. However, Mitsui Chemicals is 1.17 times more volatile than Metro AG. It trades about 0.0 of its potential returns per unit of risk. Metro AG is currently generating about -0.12 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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.33%
ValuesDaily Returns

Mitsui Chemicals  vs.  Metro AG

 Performance 
       Timeline  
Mitsui Chemicals 

Risk-Adjusted Performance

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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 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.
Metro AG 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Metro AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mitsui Chemicals and Metro AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mitsui Chemicals and Metro AG

The main advantage of trading using opposite Mitsui Chemicals and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG's long position.
The idea behind Mitsui Chemicals and Metro AG 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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