Correlation Between Mitsui Chemicals and Freeport McMoRan

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

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

Diversification Opportunities for Mitsui Chemicals and Freeport McMoRan

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Correlation Coefficient

Mitsui Chemicals  Freeport McMoRan

Pay attention - limited upside

The 3 months correlation between Mitsui and Freeport is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Freeport McMoRan go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Freeport McMoRan

If you would invest (100.00) in Freeport McMoRan on September 27, 2024 and sell it today you would earn a total of  100.00  from holding Freeport McMoRan or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Mitsui Chemicals  vs.  Freeport McMoRan

Mitsui Chemicals

Risk-Adjusted Performance

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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.

Freeport McMoRan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Freeport McMoRan is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mitsui Chemicals and Freeport McMoRan

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

The idea behind Mitsui Chemicals and Freeport McMoRan 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.