Correlation Between WILLIS LEASE and Mitsui Chemicals

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

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

Diversification Opportunities for WILLIS LEASE and Mitsui Chemicals

-0.84

Correlation Coefficient

WILLIS LEASE  Mitsui Chemicals

Pay attention - limited upside

The 3 months correlation between WILLIS and Mitsui is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Mitsui Chemicals

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 2.76 times more return on investment than Mitsui Chemicals. However, WILLIS LEASE is 2.76 times more volatile than Mitsui Chemicals. It trades about 0.24 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.11 per unit of risk. If you would invest  10,088  in WILLIS LEASE FIN on September 13, 2024 and sell it today you would earn a total of  8,912  from holding WILLIS LEASE FIN or generate 88.34% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  Mitsui Chemicals

WILLIS LEASE FIN

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE 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 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.

Pair Trading with WILLIS LEASE and Mitsui Chemicals

The main advantage of trading using opposite WILLIS LEASE and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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 WILLIS LEASE FIN 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.