Correlation Between Sterling Construction and Mitsui Chemicals
Can any of the company-specific risk be diversified away by investing in both Sterling Construction and Mitsui Chemicals 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 Sterling Construction and Mitsui Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Mitsui Chemicals, you can compare the effects of market volatilities on Sterling Construction and Mitsui Chemicals 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 Sterling Construction with a short position of Mitsui Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Mitsui Chemicals.
Diversification Opportunities for Sterling Construction and Mitsui Chemicals
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sterling and Mitsui is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Sterling Construction 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 Sterling Construction are associated (or correlated) with Mitsui Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Chemicals has no effect on the direction of Sterling Construction i.e., Sterling Construction and Mitsui Chemicals go up and down completely randomly.
Pair Corralation between Sterling Construction and Mitsui Chemicals
Assuming the 90 days horizon Sterling Construction is expected to generate 2.01 times more return on investment than Mitsui Chemicals. However, Sterling Construction is 2.01 times more volatile than Mitsui Chemicals. It trades about 0.3 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about 0.1 per unit of risk. If you would invest 14,385 in Sterling Construction on August 30, 2024 and sell it today you would earn a total of 4,690 from holding Sterling Construction or generate 32.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Mitsui Chemicals
Performance |
| Timeline |
| Sterling Construction |
| Mitsui Chemicals |
Sterling Construction and Mitsui Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Mitsui Chemicals
The main advantage of trading using opposite Sterling Construction and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction position performs unexpectedly, Mitsui Chemicals 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 Mitsui Chemicals will offset losses from the drop in Mitsui Chemicals' long position.| Sterling Construction vs. QBE Insurance Group | Sterling Construction vs. HK Electric Investments | Sterling Construction vs. REVO INSURANCE SPA | Sterling Construction vs. The Hanover Insurance |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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