Correlation Between Mitsui Chemicals and Check Point

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

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

Diversification Opportunities for Mitsui Chemicals and Check Point

0.05

Correlation Coefficient

Mitsui Chemicals  Check Point

Significant diversification

The 3 months correlation between Mitsui and Check is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Check Point go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Check Point

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Check Point. In addition to that, Mitsui Chemicals is 1.43 times more volatile than Check Point Software. It trades about -0.31 of its total potential returns per unit of risk. Check Point Software is currently generating about 0.17 per unit of volatility. If you would invest  17,350  in Check Point Software on September 24, 2024 and sell it today you would earn a total of  745.00  from holding Check Point Software or generate 4.29% return on investment over 90 days.

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

Mitsui Chemicals  vs.  Check Point Software

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 fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Check Point Software

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Check Point Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Check Point is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mitsui Chemicals and Check Point

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

The idea behind Mitsui Chemicals and Check Point Software 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.