Correlation Between Barratt Developments and Sekisui Chemical

Can any of the company-specific risk be diversified away by investing in both Barratt Developments 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 Barratt Developments and Sekisui Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barratt Developments plc and Sekisui Chemical Co, you can compare the effects of market volatilities on Barratt Developments 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 Barratt Developments with a short position of Sekisui Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barratt Developments and Sekisui Chemical.

Diversification Opportunities for Barratt Developments and Sekisui Chemical

-0.51

Correlation Coefficient

Barratt Developments  Sekisui Chemical

Excellent diversification

The 3 months correlation between Barratt and Sekisui is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Barratt Developments plc and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical and Barratt Developments 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 Barratt Developments plc 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 Barratt Developments i.e., Barratt Developments and Sekisui Chemical go up and down completely randomly.

Pair Corralation between Barratt Developments and Sekisui Chemical

Assuming the 90 days horizon Barratt Developments plc is expected to under-perform the Sekisui Chemical. In addition to that, Barratt Developments is 1.11 times more volatile than Sekisui Chemical Co. It trades about -0.03 of its total potential returns per unit of risk. Sekisui Chemical Co is currently generating about 0.08 per unit of volatility. If you would invest  1,300  in Sekisui Chemical Co on October 13, 2024 and sell it today you would earn a total of  300.00  from holding Sekisui Chemical Co or generate 23.08% return on investment over 90 days.

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

Barratt Developments plc  vs.  Sekisui Chemical Co

Barratt Developments plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barratt Developments plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sekisui Chemical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sekisui Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barratt Developments and Sekisui Chemical

The main advantage of trading using opposite Barratt Developments and Sekisui Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barratt Developments 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 Barratt Developments plc and Sekisui 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.