Correlation Between Shin-Etsu Chemical and CARGOJET INC

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

By analyzing existing cross correlation between Shin Etsu Chemical Co and CARGOJET INC VAR, you can compare the effects of market volatilities on Shin-Etsu Chemical and CARGOJET INC 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 Shin-Etsu Chemical with a short position of CARGOJET INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and CARGOJET INC.

Diversification Opportunities for Shin-Etsu Chemical and CARGOJET INC

0.24

Correlation Coefficient

Shin-Etsu Chemical  CARGOJET INC

Modest diversification

The 3 months correlation between Shin-Etsu and CARGOJET is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and CARGOJET INC VAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARGOJET INC VAR and Shin-Etsu 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 Shin Etsu Chemical Co are associated (or correlated) with CARGOJET INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARGOJET INC VAR has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and CARGOJET INC go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and CARGOJET INC

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the CARGOJET INC. But the stock apears to be less risky and, when comparing its historical volatility, Shin Etsu Chemical Co is 1.04 times less risky than CARGOJET INC. The stock trades about -0.05 of its potential returns per unit of risk. The CARGOJET INC VAR is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  8,478  in CARGOJET INC VAR on September 4, 2024 and sell it today you would lose (528.00) from holding CARGOJET INC VAR or give up 6.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Shin Etsu Chemical Co  vs.  CARGOJET INC VAR

Shin Etsu Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Etsu Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Shin-Etsu Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CARGOJET INC VAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARGOJET INC VAR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CARGOJET INC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shin-Etsu Chemical and CARGOJET INC

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

The idea behind Shin Etsu Chemical Co and CARGOJET INC VAR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..