Correlation Between American Public and Sekisui Chemical

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

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

Diversification Opportunities for American Public and Sekisui Chemical

0.81

Correlation Coefficient

American Public  Sekisui Chemical

Very poor diversification

The 3 months correlation between American and Sekisui is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding American Public Education and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical and American Public 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 American Public Education 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 American Public i.e., American Public and Sekisui Chemical go up and down completely randomly.

Pair Corralation between American Public and Sekisui Chemical

Assuming the 90 days horizon American Public is expected to generate 2.79 times less return on investment than Sekisui Chemical. But when comparing it to its historical volatility, American Public Education is 1.24 times less risky than Sekisui Chemical. It trades about 0.07 of its potential returns per unit of risk. Sekisui Chemical Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,510  in Sekisui Chemical Co on October 6, 2024 and sell it today you would earn a total of  120.00  from holding Sekisui Chemical Co or generate 7.95% return on investment over 90 days.

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

American Public Education  vs.  Sekisui Chemical Co

American Public Education

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Public Education are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Public reported solid returns over the last few months and may actually be approaching a breakup point.

Sekisui Chemical

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 10 (%) 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 American Public and Sekisui Chemical

The main advantage of trading using opposite American Public and Sekisui Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Public 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 American Public Education 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.