Correlation Between SHIN ETSU and POLENERGIA

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

By analyzing existing cross correlation between SHIN ETSU CHEMICAL and POLENERGIA SA ZY, you can compare the effects of market volatilities on SHIN ETSU and POLENERGIA 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 POLENERGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN ETSU and POLENERGIA.

Diversification Opportunities for SHIN ETSU and POLENERGIA

0.09

Correlation Coefficient

SHIN ETSU  POLENERGIA

Significant diversification

The 3 months correlation between SHIN and POLENERGIA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and POLENERGIA SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POLENERGIA SA ZY 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 are associated (or correlated) with POLENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POLENERGIA SA ZY has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and POLENERGIA go up and down completely randomly.

Pair Corralation between SHIN ETSU and POLENERGIA

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to under-perform the POLENERGIA. In addition to that, SHIN ETSU is 1.23 times more volatile than POLENERGIA SA ZY. It trades about -0.02 of its total potential returns per unit of risk. POLENERGIA SA ZY is currently generating about 0.05 per unit of volatility. If you would invest  1,440  in POLENERGIA SA ZY on September 30, 2024 and sell it today you would earn a total of  160.00  from holding POLENERGIA SA ZY or generate 11.11% return on investment over 90 days.

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

SHIN ETSU CHEMICAL  vs.  POLENERGIA SA ZY

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

POLENERGIA SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SHIN ETSU and POLENERGIA

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

The idea behind SHIN ETSU CHEMICAL and POLENERGIA SA ZY 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.