Correlation Between Mitsui Chemicals and NISSAN CHEMICAL

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

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

Diversification Opportunities for Mitsui Chemicals and NISSAN CHEMICAL

0.28

Correlation Coefficient

Mitsui Chemicals  NISSAN CHEMICAL

Modest diversification

The 3 months correlation between Mitsui and NISSAN is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and NISSAN CHEMICAL IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSAN CHEMICAL IND 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 NISSAN CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSAN CHEMICAL IND has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and NISSAN CHEMICAL go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and NISSAN CHEMICAL

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the NISSAN CHEMICAL. In addition to that, Mitsui Chemicals is 1.47 times more volatile than NISSAN CHEMICAL IND. It trades about -0.07 of its total potential returns per unit of risk. NISSAN CHEMICAL IND is currently generating about -0.06 per unit of volatility. If you would invest  3,160  in NISSAN CHEMICAL IND on October 8, 2024 and sell it today you would lose (140.00) from holding NISSAN CHEMICAL IND or give up 4.43% of portfolio value over 90 days.

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

Mitsui Chemicals  vs.  NISSAN CHEMICAL IND

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.

NISSAN CHEMICAL IND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISSAN CHEMICAL IND has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, NISSAN CHEMICAL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mitsui Chemicals and NISSAN CHEMICAL

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

The idea behind Mitsui Chemicals and NISSAN CHEMICAL IND 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.