Correlation Between Focus Home and Shin Etsu

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Can any of the company-specific risk be diversified away by investing in both Focus Home and Shin Etsu 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 Focus Home and Shin Etsu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focus Home Interactive and Shin Etsu Chemical Co, you can compare the effects of market volatilities on Focus Home and Shin Etsu 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 Focus Home with a short position of Shin Etsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Home and Shin Etsu.

Diversification Opportunities for Focus Home and Shin Etsu

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between Focus and Shin is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Focus Home Interactive and Shin Etsu Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Etsu Chemical and Focus Home 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 Focus Home Interactive are associated (or correlated) with Shin Etsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Etsu Chemical has no effect on the direction of Focus Home i.e., Focus Home and Shin Etsu go up and down completely randomly.

Pair Corralation between Focus Home and Shin Etsu

Assuming the 90 days horizon Focus Home Interactive is expected to generate 2.02 times more return on investment than Shin Etsu. However, Focus Home is 2.02 times more volatile than Shin Etsu Chemical Co. It trades about 0.1 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.05 per unit of risk. If you would invest  2,045  in Focus Home Interactive on October 6, 2024 and sell it today you would earn a total of  280.00  from holding Focus Home Interactive or generate 13.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Focus Home Interactive  vs.  Shin Etsu Chemical Co

 Performance 
       Timeline  
Focus Home Interactive 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Focus Home Interactive are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Focus Home reported solid returns over the last few months and may actually be approaching a breakup point.
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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Focus Home and Shin Etsu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Focus Home and Shin Etsu

The main advantage of trading using opposite Focus Home and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Home position performs unexpectedly, Shin Etsu 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 Shin Etsu will offset losses from the drop in Shin Etsu's long position.
The idea behind Focus Home Interactive and Shin Etsu Chemical 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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