Correlation Between Shin Etsu and Ganfeng Lithium

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

Diversification Opportunities for Shin Etsu and Ganfeng Lithium

-0.56

Correlation Coefficient

Shin Etsu  Ganfeng Lithium

Excellent diversification

The 3 months correlation between Shin and Ganfeng is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Ganfeng Lithium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ganfeng Lithium 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 Ganfeng Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ganfeng Lithium has no effect on the direction of Shin Etsu i.e., Shin Etsu and Ganfeng Lithium go up and down completely randomly.

Pair Corralation between Shin Etsu and Ganfeng Lithium

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.25 times more return on investment than Ganfeng Lithium. However, Shin Etsu Chemical Co is 3.93 times less risky than Ganfeng Lithium. It trades about -0.02 of its potential returns per unit of risk. Ganfeng Lithium Co is currently generating about -0.07 per unit of risk. If you would invest  1,818  in Shin Etsu Chemical Co on September 14, 2024 and sell it today you would lose (10.00) from holding Shin Etsu Chemical Co or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shin Etsu Chemical Co  vs.  Ganfeng Lithium Co

Shin Etsu Chemical

Risk-Adjusted Performance

0 of 100

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. In spite of latest fragile performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ganfeng Lithium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ganfeng Lithium Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Ganfeng Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin Etsu and Ganfeng Lithium

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

The idea behind Shin Etsu Chemical Co and Ganfeng Lithium 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.