Correlation Between Mitsui Chemicals and Aozora Bank
Can any of the company-specific risk be diversified away by investing in both Mitsui Chemicals and Aozora Bank 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 Mitsui Chemicals and Aozora Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsui Chemicals and Aozora Bank, you can compare the effects of market volatilities on Mitsui Chemicals and Aozora Bank 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 Mitsui Chemicals with a short position of Aozora Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and Aozora Bank.
Diversification Opportunities for Mitsui Chemicals and Aozora Bank
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mitsui and Aozora is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank and Mitsui Chemicals 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 Mitsui Chemicals are associated (or correlated) with Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Aozora Bank go up and down completely randomly.
Pair Corralation between Mitsui Chemicals and Aozora Bank
Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Aozora Bank. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Chemicals is 1.05 times less risky than Aozora Bank. The stock trades about -0.08 of its potential returns per unit of risk. The Aozora Bank is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,580 in Aozora Bank on November 2, 2024 and sell it today you would lose (140.00) from holding Aozora Bank or give up 8.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsui Chemicals vs. Aozora Bank
Performance |
| Timeline |
| Mitsui Chemicals |
| Aozora Bank |
Mitsui Chemicals and Aozora Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsui Chemicals and Aozora Bank
The main advantage of trading using opposite Mitsui Chemicals and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals position performs unexpectedly, Aozora Bank 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 Aozora Bank will offset losses from the drop in Aozora Bank's long position.| Mitsui Chemicals vs. Gaztransport Technigaz SA | Mitsui Chemicals vs. Fukuyama Transporting Co | Mitsui Chemicals vs. Easy Software AG | Mitsui Chemicals vs. Columbia Sportswear |
| Aozora Bank vs. ANTA SPORTS PRODUCT | Aozora Bank vs. TOWNSQUARE MEDIA INC | Aozora Bank vs. UNITED UTILITIES GR | Aozora Bank vs. GigaMedia |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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