Correlation Between Mitsubishi Chemical and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Mitsubishi Chemical and Sumitomo 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 Sumitomo 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 Sumitomo Chemical Co, you can compare the effects of market volatilities on Mitsubishi Chemical and Sumitomo 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsubishi Chemical and Sumitomo Chemical.
Diversification Opportunities for Mitsubishi Chemical and Sumitomo Chemical
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mitsubishi and Sumitomo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mitsubishi Chemical Holdings and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Mitsubishi Chemical i.e., Mitsubishi Chemical and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Mitsubishi Chemical and Sumitomo Chemical
Assuming the 90 days horizon Mitsubishi Chemical Holdings is expected to generate 1.16 times more return on investment than Sumitomo Chemical. However, Mitsubishi Chemical is 1.16 times more volatile than Sumitomo Chemical Co. It trades about 0.01 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about -0.02 per unit of risk. If you would invest 2,809 in Mitsubishi Chemical Holdings on August 31, 2024 and sell it today you would lose (83.00) from holding Mitsubishi Chemical Holdings or give up 2.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Mitsubishi Chemical Holdings vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Mitsubishi Chemical |
| Sumitomo Chemical |
Mitsubishi Chemical and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mitsubishi Chemical and Sumitomo Chemical
The main advantage of trading using opposite Mitsubishi Chemical and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsubishi Chemical position performs unexpectedly, Sumitomo 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 Sumitomo Chemical will offset losses from the drop in Sumitomo 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 |
| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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