Correlation Between Mitsui Chemicals and Williams Companies

Can any of the company-specific risk be diversified away by investing in both Mitsui Chemicals and Williams Companies 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 Williams Companies 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 Williams Companies, you can compare the effects of market volatilities on Mitsui Chemicals and Williams Companies 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 Williams Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and Williams Companies.

Diversification Opportunities for Mitsui Chemicals and Williams Companies

-0.52

Correlation Coefficient

Mitsui Chemicals  Williams Companies

Excellent diversification

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

Pair Corralation between Mitsui Chemicals and Williams Companies

Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 13.63 times less return on investment than Williams Companies. In addition to that, Mitsui Chemicals is 1.33 times more volatile than The Williams Companies. It trades about 0.01 of its total potential returns per unit of risk. The Williams Companies is currently generating about 0.12 per unit of volatility. If you would invest  2,593  in The Williams Companies on October 11, 2024 and sell it today you would earn a total of  2,850  from holding The Williams Companies or generate 109.91% 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.  The Williams Companies

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.

The Williams Companies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Williams Companies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Williams Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Chemicals and Williams Companies

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

The idea behind Mitsui Chemicals and The Williams Companies 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.