Correlation Between Tower Semiconductor and Mitsui Chemicals

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

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

Diversification Opportunities for Tower Semiconductor and Mitsui Chemicals

-0.82

Correlation Coefficient

Tower Semiconductor  Mitsui Chemicals

Pay attention - limited upside

The 3 months correlation between Tower and Mitsui is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor i.e., Tower Semiconductor and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Tower Semiconductor and Mitsui Chemicals

Assuming the 90 days horizon Tower Semiconductor is expected to under-perform the Mitsui Chemicals. In addition to that, Tower Semiconductor is 2.15 times more volatile than Mitsui Chemicals. It trades about -0.2 of its total potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.06 per unit of volatility. If you would invest  2,036  in Mitsui Chemicals on December 29, 2024 and sell it today you would earn a total of  84.00  from holding Mitsui Chemicals or generate 4.13% return on investment over 90 days.

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

Tower Semiconductor  vs.  Mitsui Chemicals

Tower Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tower Semiconductor 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

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Mitsui Chemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tower Semiconductor and Mitsui Chemicals

The main advantage of trading using opposite Tower Semiconductor and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor 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 Tower Semiconductor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..