Correlation Between Lsb Industries and Shin-Etsu Chemical

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

Diversification Opportunities for Lsb Industries and Shin-Etsu Chemical

-0.33

Correlation Coefficient

Lsb Industries  Shin-Etsu Chemical

Very good diversification

The 3 months correlation between Lsb and Shin-Etsu is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lsb Industries 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 Lsb Industries 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 Lsb Industries 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 Lsb Industries i.e., Lsb Industries and Shin-Etsu Chemical go up and down completely randomly.

Pair Corralation between Lsb Industries and Shin-Etsu Chemical

Considering the 90-day investment horizon Lsb Industries is expected to generate 1.81 times more return on investment than Shin-Etsu Chemical. However, Lsb Industries is 1.81 times more volatile than Shin Etsu Chemical Co. It trades about 0.11 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.14 per unit of risk. If you would invest  747.00  in Lsb Industries on August 31, 2024 and sell it today you would earn a total of  136.00  from holding Lsb Industries or generate 18.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Lsb Industries  vs.  Shin Etsu Chemical Co

Lsb Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lsb Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Lsb Industries unveiled 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 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lsb Industries and Shin-Etsu Chemical

The main advantage of trading using opposite Lsb Industries and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lsb Industries 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 Lsb Industries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.