Correlation Between Mitsui Chemicals and Sumitomo Chemical

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

By analyzing existing cross correlation between Mitsui Chemicals ADR and Sumitomo Chemical Co, you can compare the effects of market volatilities on Mitsui Chemicals and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Chemicals and Sumitomo Chemical.

Diversification Opportunities for Mitsui Chemicals and Sumitomo Chemical

0.9

Correlation Coefficient

Mitsui Chemicals  Sumitomo Chemical

Almost no diversification

The 3 months correlation between Mitsui and Sumitomo is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals ADR and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 ADR are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and Sumitomo Chemical

Assuming the 90 days horizon Mitsui Chemicals ADR is expected to generate 0.33 times more return on investment than Sumitomo Chemical. However, Mitsui Chemicals ADR is 3.05 times less risky than Sumitomo Chemical. It trades about -0.15 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about -0.11 per unit of risk. If you would invest  1,262  in Mitsui Chemicals ADR on July 24, 2025 and sell it today you would lose (25.00) from holding Mitsui Chemicals ADR or give up 1.98% of portfolio value over 90 days.

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

Mitsui Chemicals ADR  vs.  Sumitomo Chemical Co

Mitsui Chemicals ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Mitsui Chemicals may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Sumitomo Chemical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Sumitomo Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mitsui Chemicals and Sumitomo Chemical

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

The idea behind Mitsui Chemicals ADR and Sumitomo Chemical Co 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.