Correlation Between Treasury Wine and Mitsui Chemicals

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

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

Diversification Opportunities for Treasury Wine and Mitsui Chemicals

-0.48

Correlation Coefficient

Treasury Wine  Mitsui Chemicals

Very good diversification

The 3 months correlation between Treasury and Mitsui is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Treasury Wine and Mitsui Chemicals

Assuming the 90 days horizon Treasury Wine Estates is expected to under-perform the Mitsui Chemicals. In addition to that, Treasury Wine is 1.36 times more volatile than Mitsui Chemicals. It trades about -0.12 of its total potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.1 per unit of volatility. If you would invest  2,040  in Mitsui Chemicals on December 22, 2024 and sell it today you would earn a total of  160.00  from holding Mitsui Chemicals or generate 7.84% return on investment over 90 days.

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

Treasury Wine Estates  vs.  Mitsui Chemicals

Treasury Wine Estates

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mitsui Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Mitsui Chemicals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Treasury Wine and Mitsui Chemicals

The main advantage of trading using opposite Treasury Wine and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.