Correlation Between American Express and Mitsui Chemicals
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and Mitsui Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Mitsui Chemicals, you can compare the effects of market volatilities on American Express 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 American Express with a short position of Mitsui Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Mitsui Chemicals.
Diversification Opportunities for American Express and Mitsui Chemicals
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Mitsui is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and American Express 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 American Express 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 American Express i.e., American Express and Mitsui Chemicals go up and down completely randomly.
Pair Corralation between American Express and Mitsui Chemicals
Assuming the 90 days trading horizon American Express is expected to generate 0.87 times more return on investment than Mitsui Chemicals. However, American Express is 1.15 times less risky than Mitsui Chemicals. It trades about 0.16 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.03 per unit of risk. If you would invest 15,523 in American Express on September 4, 2024 and sell it today you would earn a total of 13,357 from holding American Express or generate 86.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Mitsui Chemicals
Performance |
| Timeline |
| American Express |
| Mitsui Chemicals |
American Express and Mitsui Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Mitsui Chemicals
The main advantage of trading using opposite American Express and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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.| American Express vs. Mitsui Chemicals | American Express vs. Shin Etsu Chemical Co | American Express vs. Mitsubishi Gas Chemical | American Express vs. SOUTHWEST AIRLINES |
| Mitsui Chemicals vs. TOTAL GABON | Mitsui Chemicals vs. Walgreens Boots Alliance | Mitsui Chemicals vs. Peak Resources Limited |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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