Correlation Between Eastman Chemical and Shin Etsu

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

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

Diversification Opportunities for Eastman Chemical and Shin Etsu

0.78

Correlation Coefficient

Eastman Chemical  Shin Etsu

Poor diversification

The 3 months correlation between Eastman and Shin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Chemical 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 Eastman Chemical 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 Eastman Chemical 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 Eastman Chemical i.e., Eastman Chemical and Shin Etsu go up and down completely randomly.

Pair Corralation between Eastman Chemical and Shin Etsu

Assuming the 90 days horizon Eastman Chemical is expected to generate 1.51 times less return on investment than Shin Etsu. But when comparing it to its historical volatility, Eastman Chemical is 1.53 times less risky than Shin Etsu. It trades about 0.03 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,357  in Shin Etsu Chemical Co on September 23, 2024 and sell it today you would earn a total of  701.00  from holding Shin Etsu Chemical Co or generate 29.74% return on investment over 90 days.

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

Eastman Chemical  vs.  Shin Etsu Chemical Co

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical 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.

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eastman Chemical and Shin Etsu

The main advantage of trading using opposite Eastman Chemical and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Chemical 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 Eastman Chemical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.