Correlation Between Mitsui Chemicals and Goldman Sachs

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

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

Diversification Opportunities for Mitsui Chemicals and Goldman Sachs

-0.27

Correlation Coefficient

Mitsui Chemicals  Goldman Sachs

Very good diversification

The 3 months correlation between Mitsui and Goldman is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Goldman Sachs go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Goldman Sachs

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 24.95 times less return on investment than Goldman Sachs. In addition to that, Mitsui Chemicals is 1.04 times more volatile than The Goldman Sachs. It trades about 0.0 of its total potential returns per unit of risk. The Goldman Sachs is currently generating about 0.09 per unit of volatility. If you would invest  31,118  in The Goldman Sachs on October 20, 2024 and sell it today you would earn a total of  29,492  from holding The Goldman Sachs or generate 94.77% 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.  The Goldman Sachs

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 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.

Goldman Sachs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Chemicals and Goldman Sachs

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

The idea behind Mitsui Chemicals and The Goldman Sachs 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.