Correlation Between Mitsui Chemicals and Big Yellow

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

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

Diversification Opportunities for Mitsui Chemicals and Big Yellow

0.15

Correlation Coefficient

Mitsui Chemicals  Big Yellow

Average diversification

The 3 months correlation between Mitsui and Big is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Big Yellow Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Yellow Group 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 Big Yellow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Yellow Group has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Big Yellow go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Big Yellow

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Big Yellow. In addition to that, Mitsui Chemicals is 1.64 times more volatile than Big Yellow Group. It trades about -0.08 of its total potential returns per unit of risk. Big Yellow Group is currently generating about -0.02 per unit of volatility. If you would invest  2,927  in Big Yellow Group on October 4, 2024 and sell it today you would lose (48.00) from holding Big Yellow Group or give up 1.64% of portfolio value over 90 days.

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

Mitsui Chemicals  vs.  Big Yellow Group

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 weak 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.

Big Yellow Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Yellow Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big Yellow 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 Big Yellow

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

The idea behind Mitsui Chemicals and Big Yellow Group 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.