Correlation Between Mitsui Chemicals and BP Plc
Can any of the company-specific risk be diversified away by investing in both Mitsui Chemicals and BP Plc 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 BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsui Chemicals and BP plc, you can compare the effects of market volatilities on Mitsui Chemicals and BP Plc 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 BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and BP Plc.
Diversification Opportunities for Mitsui Chemicals and BP Plc
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mitsui and BPE5 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and BP Plc go up and down completely randomly.
Pair Corralation between Mitsui Chemicals and BP Plc
Assuming the 90 days trading horizon Mitsui Chemicals is expected to generate 1.23 times less return on investment than BP Plc. In addition to that, Mitsui Chemicals is 1.89 times more volatile than BP plc. It trades about 0.07 of its total potential returns per unit of risk. BP plc is currently generating about 0.15 per unit of volatility. If you would invest 443.00 in BP plc on September 1, 2024 and sell it today you would earn a total of 18.00 from holding BP plc or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsui Chemicals vs. BP plc
Performance |
| Timeline |
| Mitsui Chemicals |
| BP plc |
Mitsui Chemicals and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsui Chemicals and BP Plc
The main advantage of trading using opposite Mitsui Chemicals and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| Mitsui Chemicals vs. SIVERS SEMICONDUCTORS AB | Mitsui Chemicals vs. Darden Restaurants | Mitsui Chemicals vs. Reliance Steel Aluminum | Mitsui Chemicals vs. Q2M Managementberatung AG |
| BP Plc vs. Transport International Holdings | BP Plc vs. JJ SNACK FOODS | BP Plc vs. COPLAND ROAD CAPITAL | BP Plc vs. QUEEN S ROAD |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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