Correlation Between SHIN ETSU and SEKISUI CHEMICAL

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

Diversification Opportunities for SHIN ETSU and SEKISUI CHEMICAL

-0.41

Correlation Coefficient

SHIN ETSU  SEKISUI CHEMICAL

Very good diversification

The 3 months correlation between SHIN and SEKISUI is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and SEKISUI CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEKISUI CHEMICAL 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 SEKISUI CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEKISUI CHEMICAL has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and SEKISUI CHEMICAL go up and down completely randomly.

Pair Corralation between SHIN ETSU and SEKISUI CHEMICAL

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to under-perform the SEKISUI CHEMICAL. But the stock apears to be less risky and, when comparing its historical volatility, SHIN ETSU CHEMICAL is 1.36 times less risky than SEKISUI CHEMICAL. The stock trades about -0.1 of its potential returns per unit of risk. The SEKISUI CHEMICAL is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,290  in SEKISUI CHEMICAL on October 1, 2024 and sell it today you would earn a total of  360.00  from holding SEKISUI CHEMICAL or generate 27.91% 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.  SEKISUI CHEMICAL

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.

SEKISUI CHEMICAL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SEKISUI CHEMICAL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, SEKISUI CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHIN ETSU and SEKISUI CHEMICAL

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

The idea behind SHIN ETSU CHEMICAL and SEKISUI CHEMICAL 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.