Correlation Between Shin-Etsu Chemical and Mitsubishi Chemical
Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical and Mitsubishi 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 Shin-Etsu Chemical and Mitsubishi Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shin Etsu Chemical Co and Mitsubishi Chemical Holdings, you can compare the effects of market volatilities on Shin-Etsu Chemical and Mitsubishi 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 Shin-Etsu Chemical with a short position of Mitsubishi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and Mitsubishi Chemical.
Diversification Opportunities for Shin-Etsu Chemical and Mitsubishi Chemical
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shin-Etsu and Mitsubishi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Mitsubishi Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Chemical and Shin-Etsu 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 Shin Etsu Chemical Co are associated (or correlated) with Mitsubishi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi Chemical has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Mitsubishi Chemical go up and down completely randomly.
Pair Corralation between Shin-Etsu Chemical and Mitsubishi Chemical
Assuming the 90 days horizon Shin-Etsu Chemical is expected to generate 1.84 times less return on investment than Mitsubishi Chemical. But when comparing it to its historical volatility, Shin Etsu Chemical Co is 2.31 times less risky than Mitsubishi Chemical. It trades about 0.14 of its potential returns per unit of risk. Mitsubishi Chemical Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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 | 94.74% |
| Values | Daily Returns |
Shin Etsu Chemical Co vs. Mitsubishi Chemical Holdings
Performance |
| Timeline |
| Shin Etsu Chemical |
| Mitsubishi Chemical |
Shin-Etsu Chemical and Mitsubishi Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin-Etsu Chemical and Mitsubishi Chemical
The main advantage of trading using opposite Shin-Etsu Chemical and Mitsubishi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin-Etsu Chemical position performs unexpectedly, Mitsubishi 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 Mitsubishi Chemical will offset losses from the drop in Mitsubishi Chemical's long position.| Shin-Etsu Chemical vs. BASF SE NA | Shin-Etsu Chemical vs. BASF SE ADR | Shin-Etsu Chemical vs. Braskem SA Class | Shin-Etsu Chemical vs. Celanese |
| 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 |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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