Correlation Between Microsoft and Mitsui Chemicals
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Mitsui Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Mitsui Chemicals, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Mitsui Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Mitsui Chemicals.
Diversification Opportunities for Microsoft and Mitsui Chemicals
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Mitsui is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Mitsui Chemicals go up and down completely randomly.
Pair Corralation between Microsoft and Mitsui Chemicals
Assuming the 90 days trading horizon Microsoft is expected to generate 0.66 times more return on investment than Mitsui Chemicals. However, Microsoft is 1.5 times less risky than Mitsui Chemicals. It trades about 0.03 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.08 per unit of risk. If you would invest 38,213 in Microsoft on August 31, 2024 and sell it today you would earn a total of 1,672 from holding Microsoft or generate 4.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Mitsui Chemicals
Performance |
| Timeline |
| Microsoft |
| Mitsui Chemicals |
Microsoft and Mitsui Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Mitsui Chemicals
The main advantage of trading using opposite Microsoft and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. PLAYTIKA HOLDING DL 01 | Microsoft vs. Apollo Investment Corp | Microsoft vs. MGIC INVESTMENT | Microsoft vs. LG Display Co |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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