Correlation Between Global Ship and Mitsui Chemicals

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

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

Diversification Opportunities for Global Ship and Mitsui Chemicals

0.16

Correlation Coefficient

Global Ship  Mitsui Chemicals

Average diversification

The 3 months correlation between Global and Mitsui is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Mitsui Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Chemicals and Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and Mitsui Chemicals go up and down completely randomly.

Pair Corralation between Global Ship and Mitsui Chemicals

Assuming the 90 days horizon Global Ship Lease is expected to generate 0.97 times more return on investment than Mitsui Chemicals. However, Global Ship Lease is 1.03 times less risky than Mitsui Chemicals. It trades about 0.01 of its potential returns per unit of risk. Mitsui Chemicals is currently generating about -0.11 per unit of risk. If you would invest  2,116  in Global Ship Lease on September 14, 2024 and sell it today you would lose (6.00) from holding Global Ship Lease or give up 0.28% of portfolio value over 90 days.

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

Global Ship Lease  vs.  Mitsui Chemicals

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global Ship is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 latest fragile performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Global Ship and Mitsui Chemicals

The main advantage of trading using opposite Global Ship and Mitsui Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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 Global Ship Lease 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.