Correlation Between AdvanSix and Shin-Etsu Chemical

Can any of the company-specific risk be diversified away by investing in both AdvanSix 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 AdvanSix 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 AdvanSix and Shin Etsu Chemical Co, you can compare the effects of market volatilities on AdvanSix 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 AdvanSix with a short position of Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvanSix and Shin-Etsu Chemical.

Diversification Opportunities for AdvanSix and Shin-Etsu Chemical

0.35

Correlation Coefficient

AdvanSix  Shin-Etsu Chemical

Weak diversification

The 3 months correlation between AdvanSix and Shin-Etsu is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding AdvanSix 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 AdvanSix 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 AdvanSix 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 AdvanSix i.e., AdvanSix and Shin-Etsu Chemical go up and down completely randomly.

Pair Corralation between AdvanSix and Shin-Etsu Chemical

Given the investment horizon of 90 days AdvanSix is expected to under-perform the Shin-Etsu Chemical. But the stock apears to be less risky and, when comparing its historical volatility, AdvanSix is 2.38 times less risky than Shin-Etsu Chemical. The stock trades about -0.15 of its potential returns per unit of risk. The Shin Etsu Chemical Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,272  in Shin Etsu Chemical Co on December 31, 2024 and sell it today you would lose (383.00) from holding Shin Etsu Chemical Co or give up 11.71% of portfolio value over 90 days.

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

AdvanSix  vs.  Shin Etsu Chemical Co

AdvanSix

Risk-Adjusted Performance

Very Weak

Over the last 90 days AdvanSix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shin Etsu Chemical

Risk-Adjusted Performance

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 nearly stable fundamental indicators, Shin-Etsu Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AdvanSix and Shin-Etsu Chemical

The main advantage of trading using opposite AdvanSix and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvanSix 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 AdvanSix 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.