Correlation Between Kaiser Aluminum and SHIN ETSU

Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum 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 Kaiser Aluminum and SHIN ETSU into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kaiser Aluminum and SHIN ETSU CHEMICAL , you can compare the effects of market volatilities on Kaiser Aluminum 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 Kaiser Aluminum with a short position of SHIN ETSU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and SHIN ETSU.

Diversification Opportunities for Kaiser Aluminum and SHIN ETSU

-0.52

Correlation Coefficient

Kaiser Aluminum  SHIN ETSU

Excellent diversification

The 3 months correlation between Kaiser and SHIN is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and SHIN ETSU go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and SHIN ETSU

Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 1.77 times more return on investment than SHIN ETSU. However, Kaiser Aluminum is 1.77 times more volatile than SHIN ETSU CHEMICAL . It trades about 0.12 of its potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about 0.0 per unit of risk. If you would invest  6,124  in Kaiser Aluminum on September 5, 2024 and sell it today you would earn a total of  1,326  from holding Kaiser Aluminum or generate 21.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Kaiser Aluminum  vs.  SHIN ETSU CHEMICAL

Kaiser Aluminum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum reported solid returns over the last few months and may actually be approaching a breakup point.

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, SHIN ETSU is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kaiser Aluminum and SHIN ETSU

The main advantage of trading using opposite Kaiser Aluminum and SHIN ETSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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 Kaiser Aluminum and SHIN ETSU CHEMICAL 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.