Correlation Between Shin Etsu and Nissan Chemical
Can any of the company-specific risk be diversified away by investing in both Shin Etsu and Nissan 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 Nissan 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 Co and Nissan Chemical Industries, you can compare the effects of market volatilities on Shin Etsu and Nissan 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 Nissan Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Etsu and Nissan Chemical.
Diversification Opportunities for Shin Etsu and Nissan Chemical
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Shin and Nissan is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Nissan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Indu 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 Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Indu has no effect on the direction of Shin Etsu i.e., Shin Etsu and Nissan Chemical go up and down completely randomly.
Pair Corralation between Shin Etsu and Nissan Chemical
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the Nissan Chemical. But the pink sheet apears to be less risky and, when comparing its historical volatility, Shin Etsu Chemical Co is 3.71 times less risky than Nissan Chemical. The pink sheet trades about -0.25 of its potential returns per unit of risk. The Nissan Chemical Industries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,523 in Nissan Chemical Industries on September 23, 2024 and sell it today you would lose (119.00) from holding Nissan Chemical Industries or give up 3.38% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 97.73% |
Values | Daily Returns |
Shin Etsu Chemical Co vs. Nissan Chemical Industries
Performance |
Timeline |
Shin Etsu Chemical |
Nissan Chemical Indu |
Shin Etsu and Nissan Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Shin Etsu and Nissan Chemical
The main advantage of trading using opposite Shin Etsu and Nissan Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Etsu position performs unexpectedly, Nissan 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 Nissan Chemical will offset losses from the drop in Nissan Chemical's long position.Shin Etsu vs. BASF SE NA | Shin Etsu vs. Braskem SA Class | Shin Etsu vs. Lsb Industries | Shin Etsu vs. Dow Inc |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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