Correlation Between EIDESVIK OFFSHORE and Mitsui Chemicals
Can any of the company-specific risk be diversified away by investing in both EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE and Mitsui Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EIDESVIK OFFSHORE NK and Mitsui Chemicals, you can compare the effects of market volatilities on EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE with a short position of Mitsui Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of EIDESVIK OFFSHORE and Mitsui Chemicals.
Diversification Opportunities for EIDESVIK OFFSHORE and Mitsui Chemicals
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EIDESVIK and Mitsui is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding EIDESVIK OFFSHORE NK and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE NK 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 EIDESVIK OFFSHORE i.e., EIDESVIK OFFSHORE and Mitsui Chemicals go up and down completely randomly.
Pair Corralation between EIDESVIK OFFSHORE and Mitsui Chemicals
Assuming the 90 days horizon EIDESVIK OFFSHORE NK is expected to under-perform the Mitsui Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, EIDESVIK OFFSHORE NK is 1.73 times less risky than Mitsui Chemicals. The stock trades about -0.08 of its potential returns per unit of risk. The Mitsui Chemicals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,100 in Mitsui Chemicals on September 1, 2024 and sell it today you would earn a total of 60.00 from holding Mitsui Chemicals or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EIDESVIK OFFSHORE NK vs. Mitsui Chemicals
Performance |
| Timeline |
| EIDESVIK OFFSHORE |
| Mitsui Chemicals |
EIDESVIK OFFSHORE and Mitsui Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EIDESVIK OFFSHORE and Mitsui Chemicals
The main advantage of trading using opposite EIDESVIK OFFSHORE and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EIDESVIK OFFSHORE 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.| EIDESVIK OFFSHORE vs. LGI Homes | EIDESVIK OFFSHORE vs. UMC Electronics Co | EIDESVIK OFFSHORE vs. Richardson Electronics | EIDESVIK OFFSHORE vs. Aedas Homes SA |
| Mitsui Chemicals vs. SIVERS SEMICONDUCTORS AB | Mitsui Chemicals vs. Darden Restaurants | Mitsui Chemicals vs. Reliance Steel Aluminum | Mitsui Chemicals vs. Q2M Managementberatung AG |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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