Correlation Between Mitsui Chemicals and OReilly Automotive

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

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

Diversification Opportunities for Mitsui Chemicals and OReilly Automotive

-0.52

Correlation Coefficient

Mitsui Chemicals  OReilly Automotive

Excellent diversification

The 3 months correlation between Mitsui and OReilly is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and OReilly Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OReilly Automotive 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 OReilly Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OReilly Automotive has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and OReilly Automotive go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and OReilly Automotive

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the OReilly Automotive. In addition to that, Mitsui Chemicals is 1.34 times more volatile than OReilly Automotive. It trades about -0.07 of its total potential returns per unit of risk. OReilly Automotive is currently generating about 0.1 per unit of volatility. If you would invest  108,100  in OReilly Automotive on October 11, 2024 and sell it today you would earn a total of  8,650  from holding OReilly Automotive or generate 8.0% 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.  OReilly Automotive

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.

OReilly Automotive

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OReilly Automotive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mitsui Chemicals and OReilly Automotive

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

The idea behind Mitsui Chemicals and OReilly Automotive 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.