Correlation Between Mitsui Chemicals and Wheaton Precious

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

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

Diversification Opportunities for Mitsui Chemicals and Wheaton Precious

-0.37

Correlation Coefficient

Mitsui Chemicals  Wheaton Precious

Very good diversification

The 3 months correlation between Mitsui and Wheaton is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Wheaton Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wheaton Precious Metals 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 Wheaton Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wheaton Precious Metals has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Wheaton Precious go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Wheaton Precious

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 0.8 times more return on investment than Wheaton Precious. However, Mitsui Chemicals is 1.25 times less risky than Wheaton Precious. It trades about -0.27 of its potential returns per unit of risk. Wheaton Precious Metals is currently generating about -0.22 per unit of risk. If you would invest  2,260  in Mitsui Chemicals on September 24, 2024 and sell it today you would lose (220.00) from holding Mitsui Chemicals or give up 9.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Mitsui Chemicals  vs.  Wheaton Precious Metals

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 uncertain 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.

Wheaton Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wheaton Precious Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Wheaton Precious is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mitsui Chemicals and Wheaton Precious

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

The idea behind Mitsui Chemicals and Wheaton Precious Metals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.