Correlation Between Mitsui Chemicals and China Communications

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

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

Diversification Opportunities for Mitsui Chemicals and China Communications

0.41

Correlation Coefficient

Mitsui Chemicals  China Communications

Very weak diversification

The 3 months correlation between Mitsui and China is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Chemicals and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Mitsui Chemicals i.e., Mitsui Chemicals and China Communications go up and down completely randomly.

Pair Corralation between Mitsui Chemicals and China Communications

Assuming the 90 days trading horizon Mitsui Chemicals is expected to under-perform the China Communications. But the stock apears to be less risky and, when comparing its historical volatility, Mitsui Chemicals is 1.55 times less risky than China Communications. The stock trades about -0.01 of its potential returns per unit of risk. The China Communications Services is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  44.00  in China Communications Services on April 9, 2025 and sell it today you would earn a total of  1.00  from holding China Communications Services or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

Mitsui Chemicals  vs.  China Communications Services

Mitsui Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Chemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Mitsui Chemicals may actually be approaching a critical reversion point that can send shares even higher in August 2025.

China Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Communications may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Mitsui Chemicals and China Communications

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

The idea behind Mitsui Chemicals and China Communications Services 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.