Correlation Between Mitsui Co and Aker ASA

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

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

Diversification Opportunities for Mitsui Co and Aker ASA

-0.58

Correlation Coefficient

Mitsui Co  Aker ASA

Excellent diversification

The 3 months correlation between Mitsui and Aker is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Co and Aker ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker ASA and Mitsui Co 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 Mitsui Co are associated (or correlated) with Aker ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker ASA has no effect on the direction of Mitsui Co i.e., Mitsui Co and Aker ASA go up and down completely randomly.

Pair Corralation between Mitsui Co and Aker ASA

Assuming the 90 days horizon Mitsui Co is expected to generate 11.5 times more return on investment than Aker ASA. However, Mitsui Co is 11.5 times more volatile than Aker ASA. It trades about 0.01 of its potential returns per unit of risk. Aker ASA is currently generating about -0.13 per unit of risk. If you would invest  2,025  in Mitsui Co on September 1, 2024 and sell it today you would lose (25.00) from holding Mitsui Co or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Mitsui Co  vs.  Aker ASA

Mitsui Co

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mitsui Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aker ASA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mitsui Co and Aker ASA

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

The idea behind Mitsui Co and Aker ASA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.