Correlation Between Mitsui Chemicals and Datang International

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

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

Diversification Opportunities for Mitsui Chemicals and Datang International

0.33

Correlation Coefficient

Mitsui Chemicals  Datang International

Weak diversification

The 3 months correlation between Mitsui and Datang is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Datang International go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Datang International

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 0.62 times more return on investment than Datang International. However, Mitsui Chemicals is 1.62 times less risky than Datang International. It trades about -0.2 of its potential returns per unit of risk. Datang International Power is currently generating about -0.13 per unit of risk. If you would invest  2,120  in Mitsui Chemicals on October 12, 2024 and sell it today you would lose (120.00) from holding Mitsui Chemicals or give up 5.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Mitsui Chemicals  vs.  Datang International Power

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 uncertain 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.

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mitsui Chemicals and Datang International

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

The idea behind Mitsui Chemicals and Datang International Power 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.