Correlation Between Wayside Technology and Mitsui Chemicals

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

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

Diversification Opportunities for Wayside Technology and Mitsui Chemicals

-0.58

Correlation Coefficient

Wayside Technology  Mitsui Chemicals

Excellent diversification

The 3 months correlation between Wayside and Mitsui is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Wayside Technology Group and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Wayside Technology 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 Wayside Technology Group are associated (or correlated) with Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of Wayside Technology i.e., Wayside Technology and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Wayside Technology and Mitsui Chemicals

Assuming the 90 days horizon Wayside Technology Group is expected to under-perform the Mitsui Chemicals. In addition to that, Wayside Technology is 2.26 times more volatile than Mitsui Chemicals. It trades about -0.11 of its total potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.18 per unit of volatility. If you would invest  2,160  in Mitsui Chemicals on September 27, 2024 and sell it today you would lose (120.00) from holding Mitsui Chemicals or give up 5.56% of portfolio value over 90 days.

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

Wayside Technology Group  vs.  Mitsui Chemicals

Wayside Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile 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.

Pair Trading with Wayside Technology and Mitsui Chemicals

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

The idea behind Wayside Technology Group and Mitsui Chemicals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.