Correlation Between Federal Agricultural and Mitsui Chemicals
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural 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 Federal Agricultural and Mitsui Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Agricultural Mortgage and Mitsui Chemicals, you can compare the effects of market volatilities on Federal Agricultural 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 Federal Agricultural with a short position of Mitsui Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Mitsui Chemicals.
Diversification Opportunities for Federal Agricultural and Mitsui Chemicals
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Federal and Mitsui is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Federal Agricultural 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 Federal Agricultural Mortgage 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 Federal Agricultural i.e., Federal Agricultural and Mitsui Chemicals go up and down completely randomly.
Pair Corralation between Federal Agricultural and Mitsui Chemicals
Assuming the 90 days horizon Federal Agricultural Mortgage is expected to generate 1.32 times more return on investment than Mitsui Chemicals. However, Federal Agricultural is 1.32 times more volatile than Mitsui Chemicals. It trades about 0.22 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.1 per unit of risk. If you would invest 17,100 in Federal Agricultural Mortgage on August 30, 2024 and sell it today you would earn a total of 2,500 from holding Federal Agricultural Mortgage or generate 14.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Mitsui Chemicals
Performance |
| Timeline |
| Federal Agricultural |
| Mitsui Chemicals |
Federal Agricultural and Mitsui Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Mitsui Chemicals
The main advantage of trading using opposite Federal Agricultural and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural 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 Federal Agricultural Mortgage 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.| Mitsui Chemicals vs. Apple Inc | Mitsui Chemicals vs. Apple Inc | Mitsui Chemicals vs. Superior Plus Corp | Mitsui Chemicals vs. SIVERS SEMICONDUCTORS AB |
Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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