Correlation Between Mitsubishi Electric and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Mitsubishi Electric and Sumitomo 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 Mitsubishi Electric and Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi Electric Corp and Sumitomo Chemical Co, you can compare the effects of market volatilities on Mitsubishi Electric and Sumitomo 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 Mitsubishi Electric with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Electric and Sumitomo Chemical.
Diversification Opportunities for Mitsubishi Electric and Sumitomo Chemical
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Mitsubishi and Sumitomo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Electric Corp and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Mitsubishi Electric 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 Mitsubishi Electric Corp are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Mitsubishi Electric i.e., Mitsubishi Electric and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Mitsubishi Electric and Sumitomo Chemical
Assuming the 90 days horizon Mitsubishi Electric Corp is expected to under-perform the Sumitomo Chemical. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mitsubishi Electric Corp is 1.07 times less risky than Sumitomo Chemical. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Sumitomo Chemical Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,087 in Sumitomo Chemical Co on November 9, 2024 and sell it today you would earn a total of 63.00 from holding Sumitomo Chemical Co or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsubishi Electric Corp vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Mitsubishi Electric Corp |
| Sumitomo Chemical |
Mitsubishi Electric and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsubishi Electric and Sumitomo Chemical
The main advantage of trading using opposite Mitsubishi Electric and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Electric position performs unexpectedly, Sumitomo 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Mitsubishi Electric vs. Legrand SA ADR | Mitsubishi Electric vs. Powell Industries | Mitsubishi Electric vs. RF Industries | Mitsubishi Electric vs. Atkore International Group |
| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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