Correlation Between G6 Materials and Shin-Etsu Chemical

Can any of the company-specific risk be diversified away by investing in both G6 Materials 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 G6 Materials 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 G6 Materials Corp and Shin Etsu Chemical Co, you can compare the effects of market volatilities on G6 Materials 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 G6 Materials with a short position of Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of G6 Materials and Shin-Etsu Chemical.

Diversification Opportunities for G6 Materials and Shin-Etsu Chemical

-0.13

Correlation Coefficient

G6 Materials  Shin-Etsu Chemical

Good diversification

The 3 months correlation between GPHBF and Shin-Etsu is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding G6 Materials Corp 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 G6 Materials 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 G6 Materials Corp 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 G6 Materials i.e., G6 Materials and Shin-Etsu Chemical go up and down completely randomly.

Pair Corralation between G6 Materials and Shin-Etsu Chemical

Assuming the 90 days horizon G6 Materials Corp is expected to generate 12.6 times more return on investment than Shin-Etsu Chemical. However, G6 Materials is 12.6 times more volatile than Shin Etsu Chemical Co. It trades about 0.25 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.13 per unit of risk. If you would invest  3.05  in G6 Materials Corp on December 30, 2024 and sell it today you would earn a total of  17.95  from holding G6 Materials Corp or generate 588.52% return on investment over 90 days.

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

G6 Materials Corp  vs.  Shin Etsu Chemical Co

G6 Materials Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in G6 Materials Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, G6 Materials reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with G6 Materials and Shin-Etsu Chemical

The main advantage of trading using opposite G6 Materials and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G6 Materials 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 G6 Materials Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.