Correlation Between Bank of America and Mitsubishi Chemical
Can any of the company-specific risk be diversified away by investing in both Bank of America and Mitsubishi Chemical 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 Bank of America and Mitsubishi Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Mitsubishi Chemical Holdings, you can compare the effects of market volatilities on Bank of America and Mitsubishi Chemical 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 Bank of America with a short position of Mitsubishi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Mitsubishi Chemical.
Diversification Opportunities for Bank of America and Mitsubishi Chemical
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Mitsubishi is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Mitsubishi Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Chemical and Bank of America 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 Bank of America are associated (or correlated) with Mitsubishi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Chemical has no effect on the direction of Bank of America i.e., Bank of America and Mitsubishi Chemical go up and down completely randomly.
Pair Corralation between Bank of America and Mitsubishi Chemical
Considering the 90-day investment horizon Bank of America is expected to generate 0.23 times more return on investment than Mitsubishi Chemical. However, Bank of America is 4.32 times less risky than Mitsubishi Chemical. It trades about -0.01 of its potential returns per unit of risk. Mitsubishi Chemical Holdings is currently generating about -0.18 per unit of risk. If you would invest 4,583 in Bank of America on September 12, 2024 and sell it today you would lose (8.00) from holding Bank of America or give up 0.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Mitsubishi Chemical Holdings
Performance |
| Timeline |
| Bank of America |
| Mitsubishi Chemical |
Bank of America and Mitsubishi Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Mitsubishi Chemical
The main advantage of trading using opposite Bank of America and Mitsubishi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Mitsubishi Chemical 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 Mitsubishi Chemical will offset losses from the drop in Mitsubishi Chemical's long position.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. Victory Integrity Smallmid Cap | Bank of America vs. Hilton Worldwide Holdings | Bank of America vs. NVIDIA |
| Mitsubishi Chemical vs. Old Republic International | Mitsubishi Chemical vs. The Hanover Insurance | Mitsubishi Chemical vs. Siriuspoint | Mitsubishi Chemical vs. MGIC Investment Corp |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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