Correlation Between Shin Etsu and Jernimo Martins

Can any of the company-specific risk be diversified away by investing in both Shin Etsu and Jernimo Martins 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 and Jernimo Martins 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 Jernimo Martins SGPS, you can compare the effects of market volatilities on Shin Etsu and Jernimo Martins 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 with a short position of Jernimo Martins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Etsu and Jernimo Martins.

Diversification Opportunities for Shin Etsu and Jernimo Martins

-0.44

Correlation Coefficient

Shin Etsu  Jernimo Martins

Very good diversification

The 3 months correlation between Shin and Jernimo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Jernimo Martins SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jernimo Martins SGPS and Shin Etsu 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 Jernimo Martins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jernimo Martins SGPS has no effect on the direction of Shin Etsu i.e., Shin Etsu and Jernimo Martins go up and down completely randomly.

Pair Corralation between Shin Etsu and Jernimo Martins

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the Jernimo Martins. But the stock apears to be less risky and, when comparing its historical volatility, Shin Etsu Chemical Co is 1.03 times less risky than Jernimo Martins. The stock trades about -0.12 of its potential returns per unit of risk. The Jernimo Martins SGPS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,655  in Jernimo Martins SGPS on September 23, 2024 and sell it today you would earn a total of  150.00  from holding Jernimo Martins SGPS or generate 9.06% return on investment over 90 days.

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

Shin Etsu Chemical Co  vs.  Jernimo Martins SGPS

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 uncertain 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.

Jernimo Martins SGPS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jernimo Martins SGPS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jernimo Martins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shin Etsu and Jernimo Martins

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

The idea behind Shin Etsu Chemical Co and Jernimo Martins SGPS 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.