Correlation Between XTANT MEDICAL and Mitsui Chemicals

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

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

Diversification Opportunities for XTANT MEDICAL and Mitsui Chemicals

0.88

Correlation Coefficient

XTANT MEDICAL  Mitsui Chemicals

Very poor diversification

The 3 months correlation between XTANT and Mitsui is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding XTANT MEDICAL HLDGS and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and XTANT MEDICAL 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 XTANT MEDICAL HLDGS 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 XTANT MEDICAL i.e., XTANT MEDICAL and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between XTANT MEDICAL and Mitsui Chemicals

Assuming the 90 days horizon XTANT MEDICAL HLDGS is expected to under-perform the Mitsui Chemicals. In addition to that, XTANT MEDICAL is 2.44 times more volatile than Mitsui Chemicals. It trades about -0.17 of its total potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.13 per unit of volatility. If you would invest  2,380  in Mitsui Chemicals on September 27, 2024 and sell it today you would lose (340.00) from holding Mitsui Chemicals or give up 14.29% of portfolio value over 90 days.

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

XTANT MEDICAL HLDGS  vs.  Mitsui Chemicals

XTANT MEDICAL HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XTANT MEDICAL HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. 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 fragile 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.

Pair Trading with XTANT MEDICAL and Mitsui Chemicals

The main advantage of trading using opposite XTANT MEDICAL and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XTANT MEDICAL 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 XTANT MEDICAL HLDGS 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.