Correlation Between Mitsui Chemicals and Carsales

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

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

Diversification Opportunities for Mitsui Chemicals and Carsales

0.48

Correlation Coefficient

Mitsui Chemicals  Carsales

Very weak diversification

The 3 months correlation between Mitsui and Carsales is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Carsales go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Carsales

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Chemicals is 1.01 times less risky than Carsales. The stock trades about 0.0 of its potential returns per unit of risk. The Carsales is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,260  in Carsales on October 25, 2024 and sell it today you would earn a total of  80.00  from holding Carsales or generate 3.54% return on investment over 90 days.

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

Mitsui Chemicals  vs.  Carsales

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 rather sound forward indicators, Mitsui Chemicals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Carsales

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carsales are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carsales 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 Carsales

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

The idea behind Mitsui Chemicals and Carsales 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..