Correlation Between Pioneer Natural and Mitsui

Can any of the company-specific risk be diversified away by investing in both Pioneer Natural and Mitsui 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 Pioneer Natural and Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pioneer Natural Resources and Mitsui Company, you can compare the effects of market volatilities on Pioneer Natural and Mitsui 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 Pioneer Natural with a short position of Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pioneer Natural and Mitsui.

Diversification Opportunities for Pioneer Natural and Mitsui

0.69

Correlation Coefficient

Pioneer Natural  Mitsui

Poor diversification

The 3 months correlation between Pioneer and Mitsui is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Natural Resources and Mitsui Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Company and Pioneer Natural 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 Pioneer Natural Resources are associated (or correlated) with Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Company has no effect on the direction of Pioneer Natural i.e., Pioneer Natural and Mitsui go up and down completely randomly.

Pair Corralation between Pioneer Natural and Mitsui

Considering the 90-day investment horizon Pioneer Natural is expected to generate 1.62 times less return on investment than Mitsui. In addition to that, Pioneer Natural is 1.12 times more volatile than Mitsui Company. It trades about 0.03 of its total potential returns per unit of risk. Mitsui Company is currently generating about 0.05 per unit of volatility. If you would invest  51,633  in Mitsui Company on January 26, 2024 and sell it today you would earn a total of  8,207  from holding Mitsui Company or generate 15.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	38.87%
Values	Daily Returns

Pioneer Natural Resources  vs.  Mitsui Company

Pioneer Natural Resources

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Natural Resources are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pioneer Natural exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mitsui Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pioneer Natural and Mitsui

The main advantage of trading using opposite Pioneer Natural and Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pioneer Natural position performs unexpectedly, Mitsui 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 will offset losses from the drop in Mitsui's long position.

The idea behind Pioneer Natural Resources and Mitsui Company 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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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.