Correlation Between Mitsui Chemicals and Yamaha

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

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

Diversification Opportunities for Mitsui Chemicals and Yamaha

0.71

Correlation Coefficient

Mitsui Chemicals  Yamaha

Poor diversification

The 3 months correlation between Mitsui and Yamaha is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Yamaha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Yamaha go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Yamaha

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Yamaha. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Chemicals is 1.37 times less risky than Yamaha. The stock trades about -0.19 of its potential returns per unit of risk. The Yamaha is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  703.00  in Yamaha on October 4, 2024 and sell it today you would lose (29.00) from holding Yamaha or give up 4.13% of portfolio value over 90 days.

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

Mitsui Chemicals  vs.  Yamaha

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 uncertain 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.

Yamaha

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Yamaha has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mitsui Chemicals and Yamaha

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

The idea behind Mitsui Chemicals and Yamaha 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.