Correlation Between Mitsui Chemicals and China Resources
Can any of the company-specific risk be diversified away by investing in both Mitsui Chemicals and China Resources 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 China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsui Chemicals and China Resources Land, you can compare the effects of market volatilities on Mitsui Chemicals and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and China Resources.
Diversification Opportunities for Mitsui Chemicals and China Resources
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Mitsui and China is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Land has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and China Resources go up and down completely randomly.
Pair Corralation between Mitsui Chemicals and China Resources
Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Chemicals is 1.39 times less risky than China Resources. The stock trades about -0.06 of its potential returns per unit of risk. The China Resources Land is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 274.00 in China Resources Land on November 7, 2024 and sell it today you would earn a total of 2.00 from holding China Resources Land or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsui Chemicals vs. China Resources Land
Performance |
| Timeline |
| Mitsui Chemicals |
| China Resources Land |
Mitsui Chemicals and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsui Chemicals and China Resources
The main advantage of trading using opposite Mitsui Chemicals and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui Chemicals position performs unexpectedly, China Resources 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 China Resources will offset losses from the drop in China Resources' long position.| Mitsui Chemicals vs. Arrow Electronics | Mitsui Chemicals vs. Nordic Semiconductor ASA | Mitsui Chemicals vs. AOI Electronics Co | Mitsui Chemicals vs. Renesas Electronics |
| China Resources vs. The Japan Steel | China Resources vs. United States Steel | China Resources vs. ELL ENVIRONHLDGS HD 0001 | China Resources vs. Samsung Electronics Co |
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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