Correlation Between Mitsui Chemicals and Diamyd Medical

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

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

Diversification Opportunities for Mitsui Chemicals and Diamyd Medical

-0.18

Correlation Coefficient

Mitsui Chemicals  Diamyd Medical

Good diversification

The 3 months correlation between Mitsui and Diamyd is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Diamyd Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamyd Medical AB 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 Diamyd Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamyd Medical AB has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Diamyd Medical go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Diamyd Medical

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Diamyd Medical. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Chemicals is 2.36 times less risky than Diamyd Medical. The stock trades about -0.07 of its potential returns per unit of risk. The Diamyd Medical AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Diamyd Medical AB on October 11, 2024 and sell it today you would earn a total of  36.00  from holding Diamyd Medical AB or generate 30.77% return on investment over 90 days.

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

Mitsui Chemicals  vs.  Diamyd Medical AB

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.

Diamyd Medical AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamyd Medical AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Diamyd Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Chemicals and Diamyd Medical

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

The idea behind Mitsui Chemicals and Diamyd Medical AB 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..