Correlation Between Shin Etsu and Oriental Land

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

Diversification Opportunities for Shin Etsu and Oriental Land

0.41
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Shin Etsu and Oriental Land

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.64 times more return on investment than Oriental Land. However, Shin Etsu Chemical Co is 1.55 times less risky than Oriental Land. It trades about -0.01 of its potential returns per unit of risk. Oriental Land Co is currently generating about -0.01 per unit of risk. If you would invest  3,845  in Shin Etsu Chemical Co on September 13, 2024 and sell it today you would lose (350.00) from holding Shin Etsu Chemical Co or give up 9.1% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.41%
ValuesDaily Returns

Shin Etsu Chemical Co  vs.  Oriental Land Co

 Performance 
       Timeline  
Shin Etsu Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 fundamental indicators, Shin Etsu is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Oriental Land 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Oriental Land Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Oriental Land is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Shin Etsu and Oriental Land Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shin Etsu and Oriental Land

The main advantage of trading using opposite Shin Etsu and Oriental Land positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Etsu position performs unexpectedly, Oriental Land 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 Oriental Land will offset losses from the drop in Oriental Land's long position.
The idea behind Shin Etsu Chemical Co and Oriental Land Co 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.
Check out your portfolio center.
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.

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