Correlation Between Pembina Pipeline and Mitsubishi Gas
Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline and Mitsubishi Gas 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 Pembina Pipeline and Mitsubishi Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pembina Pipeline Corp and Mitsubishi Gas Chemical, you can compare the effects of market volatilities on Pembina Pipeline and Mitsubishi Gas 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 Pembina Pipeline with a short position of Mitsubishi Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and Mitsubishi Gas.
Diversification Opportunities for Pembina Pipeline and Mitsubishi Gas
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pembina and Mitsubishi is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Mitsubishi Gas Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Gas Chemical and Pembina Pipeline 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 Pembina Pipeline Corp are associated (or correlated) with Mitsubishi Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Gas Chemical has no effect on the direction of Pembina Pipeline i.e., Pembina Pipeline and Mitsubishi Gas go up and down completely randomly.
Pair Corralation between Pembina Pipeline and Mitsubishi Gas
Assuming the 90 days horizon Pembina Pipeline is expected to generate 5.11 times less return on investment than Mitsubishi Gas. But when comparing it to its historical volatility, Pembina Pipeline Corp is 1.1 times less risky than Mitsubishi Gas. It trades about 0.0 of its potential returns per unit of risk. Mitsubishi Gas Chemical is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,690 in Mitsubishi Gas Chemical on October 24, 2024 and sell it today you would earn a total of 20.00 from holding Mitsubishi Gas Chemical or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pembina Pipeline Corp vs. Mitsubishi Gas Chemical
Performance |
| Timeline |
| Pembina Pipeline Corp |
| Mitsubishi Gas Chemical |
Pembina Pipeline and Mitsubishi Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pembina Pipeline and Mitsubishi Gas
The main advantage of trading using opposite Pembina Pipeline and Mitsubishi Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline position performs unexpectedly, Mitsubishi Gas 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 Mitsubishi Gas will offset losses from the drop in Mitsubishi Gas' long position.The idea behind Pembina Pipeline Corp and Mitsubishi Gas Chemical pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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