Correlation Between CENTURIA OFFICE and Shin-Etsu Chemical

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

By analyzing existing cross correlation between CENTURIA OFFICE REIT and Shin Etsu Chemical Co, you can compare the effects of market volatilities on CENTURIA OFFICE and Shin-Etsu 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 CENTURIA OFFICE with a short position of Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CENTURIA OFFICE and Shin-Etsu Chemical.

Diversification Opportunities for CENTURIA OFFICE and Shin-Etsu Chemical

0.72

Correlation Coefficient

CENTURIA OFFICE  Shin-Etsu Chemical

Poor diversification

The 3 months correlation between CENTURIA and Shin-Etsu is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CENTURIA OFFICE REIT 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 CENTURIA OFFICE 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 CENTURIA OFFICE REIT are associated (or correlated) with Shin-Etsu Chemical. 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 CENTURIA OFFICE i.e., CENTURIA OFFICE and Shin-Etsu Chemical go up and down completely randomly.

Pair Corralation between CENTURIA OFFICE and Shin-Etsu Chemical

Assuming the 90 days horizon CENTURIA OFFICE REIT is expected to generate 1.1 times more return on investment than Shin-Etsu Chemical. However, CENTURIA OFFICE is 1.1 times more volatile than Shin Etsu Chemical Co. It trades about -0.04 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.1 per unit of risk. If you would invest  71.00  in CENTURIA OFFICE REIT on October 22, 2024 and sell it today you would lose (4.00) from holding CENTURIA OFFICE REIT or give up 5.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CENTURIA OFFICE REIT  vs.  Shin Etsu Chemical Co

CENTURIA OFFICE REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CENTURIA OFFICE REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CENTURIA OFFICE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. 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.

Pair Trading with CENTURIA OFFICE and Shin-Etsu Chemical

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

The idea behind CENTURIA OFFICE REIT 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.