Correlation Between SHIN ETSU and New Residential

Can any of the company-specific risk be diversified away by investing in both SHIN ETSU and New Residential 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 New Residential 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 New Residential Investment, you can compare the effects of market volatilities on SHIN ETSU and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN ETSU and New Residential.

Diversification Opportunities for SHIN ETSU and New Residential

-0.49

Correlation Coefficient

SHIN ETSU  New Residential

Very good diversification

The 3 months correlation between SHIN and New is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and New Residential go up and down completely randomly.

Pair Corralation between SHIN ETSU and New Residential

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to under-perform the New Residential. In addition to that, SHIN ETSU is 1.95 times more volatile than New Residential Investment. It trades about -0.13 of its total potential returns per unit of risk. New Residential Investment is currently generating about 0.11 per unit of volatility. If you would invest  981.00  in New Residential Investment on September 25, 2024 and sell it today you would earn a total of  67.00  from holding New Residential Investment or generate 6.83% 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  vs.  New Residential Investment

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 fragile 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.

New Residential Inve

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SHIN ETSU and New Residential

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

The idea behind SHIN ETSU CHEMICAL and New Residential Investment 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.