Correlation Between Mitsui Chemicals and PT Bank

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

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

Diversification Opportunities for Mitsui Chemicals and PT Bank

0.39

Correlation Coefficient

Mitsui Chemicals  PT Bank

Weak diversification

The 3 months correlation between Mitsui and BYRA is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and PT Bank go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and PT Bank

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 0.25 times more return on investment than PT Bank. However, Mitsui Chemicals is 4.03 times less risky than PT Bank. It trades about 0.04 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.18 per unit of risk. If you would invest  2,100  in Mitsui Chemicals on December 2, 2024 and sell it today you would earn a total of  20.00  from holding Mitsui Chemicals or generate 0.95% return on investment over 90 days.

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

Mitsui Chemicals  vs.  PT Bank Rakyat

Mitsui Chemicals

Risk-Adjusted Performance

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.

PT Bank Rakyat

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Mitsui Chemicals and PT Bank

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

The idea behind Mitsui Chemicals and PT Bank Rakyat 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.