Correlation Between Mitsubishi Chemical and BASF SE
Can any of the company-specific risk be diversified away by investing in both Mitsubishi Chemical and BASF SE 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 Chemical and BASF SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mitsubishi Chemical Holdings and BASF SE ADR, you can compare the effects of market volatilities on Mitsubishi Chemical and BASF SE 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 Chemical with a short position of BASF SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Chemical and BASF SE.
Diversification Opportunities for Mitsubishi Chemical and BASF SE
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Mitsubishi and BASF is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Chemical Holdings and BASF SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASF SE ADR and Mitsubishi Chemical 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 Chemical Holdings are associated (or correlated) with BASF SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASF SE ADR has no effect on the direction of Mitsubishi Chemical i.e., Mitsubishi Chemical and BASF SE go up and down completely randomly.
Pair Corralation between Mitsubishi Chemical and BASF SE
Assuming the 90 days horizon Mitsubishi Chemical is expected to generate 4.55 times less return on investment than BASF SE. But when comparing it to its historical volatility, Mitsubishi Chemical Holdings is 1.4 times less risky than BASF SE. It trades about 0.08 of its potential returns per unit of risk. BASF SE ADR is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,086 in BASF SE ADR on November 3, 2024 and sell it today you would earn a total of 116.00 from holding BASF SE ADR or generate 10.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsubishi Chemical Holdings vs. BASF SE ADR
Performance |
| Timeline |
| Mitsubishi Chemical |
| BASF SE ADR |
Mitsubishi Chemical and BASF SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsubishi Chemical and BASF SE
The main advantage of trading using opposite Mitsubishi Chemical and BASF SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Chemical position performs unexpectedly, BASF SE 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 BASF SE will offset losses from the drop in BASF SE's long position.| Mitsubishi Chemical vs. Sumitomo Chemical Co | Mitsubishi Chemical vs. Asahi Kaisei Corp | Mitsubishi Chemical vs. Nitto Denko Corp | Mitsubishi Chemical vs. Shin Etsu Chemical Co |
| BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. Shin Etsu Chemical Co | BASF SE vs. First Graphene | BASF SE vs. Huntsman |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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