Correlation Between Mitsui Chemicals and Kaufman Broad

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

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

Diversification Opportunities for Mitsui Chemicals and Kaufman Broad

-0.09

Correlation Coefficient

Mitsui Chemicals  Kaufman Broad

Good diversification

The 3 months correlation between Mitsui and Kaufman is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and Kaufman Broad SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaufman Broad SA and Mitsui Chemicals 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 Chemicals are associated (or correlated) with Kaufman Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaufman Broad SA has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Kaufman Broad go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Kaufman Broad

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the Kaufman Broad. In addition to that, Mitsui Chemicals is 1.02 times more volatile than Kaufman Broad SA. It trades about -0.14 of its total potential returns per unit of risk. Kaufman Broad SA is currently generating about 0.04 per unit of volatility. If you would invest  3,075  in Kaufman Broad SA on September 28, 2024 and sell it today you would earn a total of  95.00  from holding Kaufman Broad SA or generate 3.09% return on investment over 90 days.

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

Mitsui Chemicals  vs.  Kaufman Broad SA

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 uncertain performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kaufman Broad SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaufman Broad SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kaufman Broad 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 Chemicals and Kaufman Broad

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

The idea behind Mitsui Chemicals and Kaufman Broad SA 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.