Correlation Between Shin-Etsu Chemical and North American

Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical and North American 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 North American 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 North American Construction, you can compare the effects of market volatilities on Shin-Etsu Chemical and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and North American.

Diversification Opportunities for Shin-Etsu Chemical and North American

-0.32

Correlation Coefficient

Shin-Etsu Chemical  North American

Very good diversification

The 3 months correlation between Shin-Etsu and North is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and North American go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and North American

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.85 times more return on investment than North American. However, Shin Etsu Chemical Co is 1.18 times less risky than North American. It trades about 0.22 of its potential returns per unit of risk. North American Construction is currently generating about 0.14 per unit of risk. If you would invest  3,314  in Shin Etsu Chemical Co on September 4, 2024 and sell it today you would earn a total of  286.00  from holding Shin Etsu Chemical Co or generate 8.63% return on investment over 90 days.

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

Shin Etsu Chemical Co  vs.  North American Construction

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.

North American Const

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, North American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Shin-Etsu Chemical and North American

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

The idea behind Shin Etsu Chemical Co and North American Construction 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.