Correlation Between Mitsui Chemicals and First Quantum

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

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

Diversification Opportunities for Mitsui Chemicals and First Quantum

0.04

Correlation Coefficient

Mitsui Chemicals  First Quantum

Significant diversification

The 3 months correlation between Mitsui and First is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals 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 First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and First Quantum go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and First Quantum

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 0.43 times more return on investment than First Quantum. However, Mitsui Chemicals is 2.35 times less risky than First Quantum. It trades about 0.01 of its potential returns per unit of risk. First Quantum Minerals is currently generating about 0.0 per unit of risk. If you would invest  2,080  in Mitsui Chemicals on September 29, 2024 and sell it today you would earn a total of  20.00  from holding Mitsui Chemicals or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Mitsui Chemicals  vs.  First Quantum Minerals

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.

First Quantum Minerals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First Quantum is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsui Chemicals and First Quantum

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

The idea behind Mitsui Chemicals and First Quantum Minerals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.