Correlation Between SHIN ETSU and Newmont

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

Diversification Opportunities for SHIN ETSU and Newmont

0.71

Correlation Coefficient

SHIN ETSU  Newmont

Poor diversification

The 3 months correlation between SHIN and Newmont is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont 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 Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and Newmont go up and down completely randomly.

Pair Corralation between SHIN ETSU and Newmont

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 0.71 times more return on investment than Newmont. However, SHIN ETSU CHEMICAL is 1.41 times less risky than Newmont. It trades about -0.04 of its potential returns per unit of risk. Newmont is currently generating about -0.09 per unit of risk. If you would invest  3,645  in SHIN ETSU CHEMICAL on September 12, 2024 and sell it today you would lose (219.00) from holding SHIN ETSU CHEMICAL or give up 6.01% of portfolio value over 90 days.

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

SHIN ETSU CHEMICAL  vs.  Newmont

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 comparatively stable basic indicators, SHIN ETSU is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Pair Trading with SHIN ETSU and Newmont

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

The idea behind SHIN ETSU CHEMICAL and Newmont 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 Transaction History module to view history of all your transactions and understand their impact on performance.