Correlation Between Sherwin Williams and Mitsui Chemicals

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

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

Diversification Opportunities for Sherwin Williams and Mitsui Chemicals

0.29

Correlation Coefficient

Sherwin Williams  Mitsui Chemicals

Modest diversification

The 3 months correlation between Sherwin and Mitsui is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sherwin Williams Co and Mitsui Chemicals ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals ADR and Sherwin Williams 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 Sherwin Williams Co 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 ADR has no effect on the direction of Sherwin Williams i.e., Sherwin Williams and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Sherwin Williams and Mitsui Chemicals

Considering the 90-day investment horizon Sherwin Williams Co is expected to under-perform the Mitsui Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Sherwin Williams Co is 5.59 times less risky than Mitsui Chemicals. The stock trades about -0.63 of its potential returns per unit of risk. The Mitsui Chemicals ADR is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,147  in Mitsui Chemicals ADR on October 6, 2024 and sell it today you would lose (117.00) from holding Mitsui Chemicals ADR or give up 10.2% of portfolio value over 90 days.

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

Sherwin Williams Co  vs.  Mitsui Chemicals ADR

Sherwin Williams

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sherwin Williams Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Mitsui Chemicals ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sherwin Williams and Mitsui Chemicals

The main advantage of trading using opposite Sherwin Williams and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sherwin Williams 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 Sherwin Williams Co and Mitsui Chemicals ADR 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.