Correlation Between Solvay SA and Mitsubishi Chemical
Can any of the company-specific risk be diversified away by investing in both Solvay SA 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 Solvay SA and Mitsubishi Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solvay SA and Mitsubishi Chemical Holdings, you can compare the effects of market volatilities on Solvay SA 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 Solvay SA with a short position of Mitsubishi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay SA and Mitsubishi Chemical.
Diversification Opportunities for Solvay SA and Mitsubishi Chemical
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solvay and Mitsubishi is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Mitsubishi Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi Chemical and Solvay SA 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 Solvay SA 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 Solvay SA i.e., Solvay SA and Mitsubishi Chemical go up and down completely randomly.
Pair Corralation between Solvay SA and Mitsubishi Chemical
Assuming the 90 days horizon Solvay SA is expected to generate 16.03 times more return on investment than Mitsubishi Chemical. However, Solvay SA is 16.03 times more volatile than Mitsubishi Chemical Holdings. It trades about 0.24 of its potential returns per unit of risk. Mitsubishi Chemical Holdings is currently generating about 0.22 per unit of risk. If you would invest 2,525 in Solvay SA on January 26, 2024 and sell it today you would earn a total of 815.00 from holding Solvay SA or generate 32.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solvay SA vs. Mitsubishi Chemical Holdings
Performance |
| Timeline |
| Solvay SA |
| Mitsubishi Chemical |
Solvay SA and Mitsubishi Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solvay SA and Mitsubishi Chemical
The main advantage of trading using opposite Solvay SA and Mitsubishi Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solvay SA 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.| Solvay SA vs. Braskem SA Class | Solvay SA vs. Lsb Industries | Solvay SA vs. Dow Inc | Solvay SA vs. Huntsman |
| Mitsubishi Chemical vs. Braskem SA Class | Mitsubishi Chemical vs. Lsb Industries | Mitsubishi Chemical vs. Dow Inc | Mitsubishi Chemical vs. Huntsman |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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