Correlation Between Mitsubishi Chemical and Shin-Etsu Chemical
Can any of the company-specific risk be diversified away by investing in both Mitsubishi Chemical and Shin-Etsu Chemical 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 Shin-Etsu Chemical 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 Shin Etsu Chemical Co, you can compare the effects of market volatilities on Mitsubishi Chemical and Shin-Etsu Chemical 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 Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Chemical and Shin-Etsu Chemical.
Diversification Opportunities for Mitsubishi Chemical and Shin-Etsu Chemical
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mitsubishi and Shin-Etsu is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Chemical Holdings and Shin Etsu Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Etsu Chemical 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 Shin-Etsu Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Etsu Chemical has no effect on the direction of Mitsubishi Chemical i.e., Mitsubishi Chemical and Shin-Etsu Chemical go up and down completely randomly.
Pair Corralation between Mitsubishi Chemical and Shin-Etsu Chemical
Assuming the 90 days horizon Mitsubishi Chemical Holdings is expected to generate 1.05 times more return on investment than Shin-Etsu Chemical. However, Mitsubishi Chemical is 1.05 times more volatile than Shin Etsu Chemical Co. It trades about 0.11 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.03 per unit of risk. If you would invest 2,460 in Mitsubishi Chemical Holdings on October 23, 2024 and sell it today you would earn a total of 108.00 from holding Mitsubishi Chemical Holdings or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mitsubishi Chemical Holdings vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| Mitsubishi Chemical |
| Shin Etsu Chemical |
Mitsubishi Chemical and Shin-Etsu Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsubishi Chemical and Shin-Etsu Chemical
The main advantage of trading using opposite Mitsubishi Chemical and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Chemical position performs unexpectedly, Shin-Etsu Chemical 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 Shin-Etsu Chemical will offset losses from the drop in Shin-Etsu Chemical'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 |
| Shin-Etsu Chemical vs. Kuraray Co | Shin-Etsu Chemical vs. Mitsubishi Chemical Holdings | Shin-Etsu Chemical vs. Sumitomo Chemical Co | Shin-Etsu Chemical vs. Valhi Inc |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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