Correlation Between Arca Continental and Mitsui

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

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

Diversification Opportunities for Arca Continental and Mitsui

0.24

Correlation Coefficient

Arca Continental  Mitsui

Modest diversification

The 3 months correlation between Arca and Mitsui is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Arca Continental SAB and Mitsui Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui and Arca Continental 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 Arca Continental SAB 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 has no effect on the direction of Arca Continental i.e., Arca Continental and Mitsui go up and down completely randomly.

Pair Corralation between Arca Continental and Mitsui

Assuming the 90 days horizon Arca Continental SAB is expected to under-perform the Mitsui. But the pink sheet apears to be less risky and, when comparing its historical volatility, Arca Continental SAB is 1.67 times less risky than Mitsui. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Mitsui Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,989  in Mitsui Co on September 15, 2024 and sell it today you would earn a total of  111.00  from holding Mitsui Co or generate 5.58% return on investment over 90 days.

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

Arca Continental SAB  vs.  Mitsui Co

Arca Continental SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arca Continental SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arca Continental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mitsui

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mitsui may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arca Continental and Mitsui

The main advantage of trading using opposite Arca Continental and Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arca Continental 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 Arca Continental SAB and Mitsui Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.