Correlation Between INSURANCE AUST and Sekisui Chemical

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

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

Diversification Opportunities for INSURANCE AUST and Sekisui Chemical

0.83

Correlation Coefficient

INSURANCE AUST  Sekisui Chemical

Very poor diversification

The 3 months correlation between INSURANCE and Sekisui is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical and INSURANCE AUST 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 INSURANCE AUST GRP are associated (or correlated) with Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of INSURANCE AUST i.e., INSURANCE AUST and Sekisui Chemical go up and down completely randomly.

Pair Corralation between INSURANCE AUST and Sekisui Chemical

Assuming the 90 days trading horizon INSURANCE AUST is expected to generate 1.07 times less return on investment than Sekisui Chemical. But when comparing it to its historical volatility, INSURANCE AUST GRP is 1.1 times less risky than Sekisui Chemical. It trades about 0.09 of its potential returns per unit of risk. Sekisui Chemical Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,360  in Sekisui Chemical Co on September 15, 2024 and sell it today you would earn a total of  120.00  from holding Sekisui Chemical Co or generate 8.82% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  Sekisui Chemical Co

INSURANCE AUST GRP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sekisui Chemical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sekisui Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with INSURANCE AUST and Sekisui Chemical

The main advantage of trading using opposite INSURANCE AUST and Sekisui Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSURANCE AUST position performs unexpectedly, Sekisui 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 Sekisui Chemical will offset losses from the drop in Sekisui Chemical's long position.

The idea behind INSURANCE AUST GRP and Sekisui 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.