Correlation Between Pato Chemical and Mitsib Leasing

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

By analyzing existing cross correlation between Pato Chemical Industry and Mitsib Leasing Public, you can compare the effects of market volatilities on Pato Chemical and Mitsib Leasing 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 Pato Chemical with a short position of Mitsib Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pato Chemical and Mitsib Leasing.

Diversification Opportunities for Pato Chemical and Mitsib Leasing

0.7

Correlation Coefficient

Pato Chemical  Mitsib Leasing

Poor diversification

The 3 months correlation between Pato and Mitsib is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pato Chemical Industry and Mitsib Leasing Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsib Leasing Public and Pato Chemical 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 Pato Chemical Industry are associated (or correlated) with Mitsib Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsib Leasing Public has no effect on the direction of Pato Chemical i.e., Pato Chemical and Mitsib Leasing go up and down completely randomly.

Pair Corralation between Pato Chemical and Mitsib Leasing

Assuming the 90 days trading horizon Pato Chemical Industry is expected to under-perform the Mitsib Leasing. But the stock apears to be less risky and, when comparing its historical volatility, Pato Chemical Industry is 1.83 times less risky than Mitsib Leasing. The stock trades about -0.24 of its potential returns per unit of risk. The Mitsib Leasing Public is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  77.00  in Mitsib Leasing Public on September 16, 2024 and sell it today you would lose (6.00) from holding Mitsib Leasing Public or give up 7.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Pato Chemical Industry  vs.  Mitsib Leasing Public

Pato Chemical Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pato Chemical Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Mitsib Leasing Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsib Leasing Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pato Chemical and Mitsib Leasing

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

The idea behind Pato Chemical Industry and Mitsib Leasing Public 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.