Correlation Between Aegean Airlines and Mitsui Chemicals

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

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

Diversification Opportunities for Aegean Airlines and Mitsui Chemicals

0.79

Correlation Coefficient

Aegean Airlines  Mitsui Chemicals

Poor diversification

The 3 months correlation between Aegean and Mitsui is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aegean Airlines SA and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Aegean Airlines 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 Aegean Airlines SA 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 Aegean Airlines i.e., Aegean Airlines and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Aegean Airlines and Mitsui Chemicals

Assuming the 90 days horizon Aegean Airlines SA is expected to generate 1.25 times more return on investment than Mitsui Chemicals. However, Aegean Airlines is 1.25 times more volatile than Mitsui Chemicals. It trades about 0.02 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.01 per unit of risk. If you would invest  914.00  in Aegean Airlines SA on August 31, 2024 and sell it today you would earn a total of  36.00  from holding Aegean Airlines SA or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aegean Airlines SA  vs.  Mitsui Chemicals

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Mitsui Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Aegean Airlines and Mitsui Chemicals

The main advantage of trading using opposite Aegean Airlines and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aegean Airlines 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.

The idea behind Aegean Airlines SA and Mitsui Chemicals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.