Correlation Between Mitsui Chemicals and Morgan Stanley

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

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

Diversification Opportunities for Mitsui Chemicals and Morgan Stanley

-0.58

Correlation Coefficient

Mitsui Chemicals  Morgan Stanley

Excellent diversification

The 3 months correlation between Mitsui and Morgan is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Morgan Stanley go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Morgan Stanley

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Morgan Stanley. In addition to that, Mitsui Chemicals is 1.06 times more volatile than Morgan Stanley. It trades about -0.07 of its total potential returns per unit of risk. Morgan Stanley is currently generating about 0.14 per unit of volatility. If you would invest  7,936  in Morgan Stanley on October 12, 2024 and sell it today you would earn a total of  4,564  from holding Morgan Stanley or generate 57.51% return on investment over 90 days.

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

Mitsui Chemicals  vs.  Morgan Stanley

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 fragile 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.

Morgan Stanley

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Morgan Stanley reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Chemicals and Morgan Stanley

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

The idea behind Mitsui Chemicals and Morgan Stanley 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.