Correlation Between SHIN-ETSU CHEMICAL and DiamondRock Hospitality

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

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

Diversification Opportunities for SHIN-ETSU CHEMICAL and DiamondRock Hospitality

0.92

Correlation Coefficient

SHIN-ETSU CHEMICAL  DiamondRock Hospitality

Almost no diversification

The 3 months correlation between SHIN-ETSU and DiamondRock is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality and SHIN-ETSU 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 SHIN ETSU CHEMICAL are associated (or correlated) with DiamondRock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiamondRock Hospitality has no effect on the direction of SHIN-ETSU CHEMICAL i.e., SHIN-ETSU CHEMICAL and DiamondRock Hospitality go up and down completely randomly.

Pair Corralation between SHIN-ETSU CHEMICAL and DiamondRock Hospitality

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 1.06 times more return on investment than DiamondRock Hospitality. However, SHIN-ETSU CHEMICAL is 1.06 times more volatile than DiamondRock Hospitality. It trades about -0.15 of its potential returns per unit of risk. DiamondRock Hospitality is currently generating about -0.17 per unit of risk. If you would invest  3,130  in SHIN ETSU CHEMICAL on December 30, 2024 and sell it today you would lose (470.00) from holding SHIN ETSU CHEMICAL or give up 15.02% of portfolio value over 90 days.

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

SHIN ETSU CHEMICAL   vs.  DiamondRock Hospitality

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

DiamondRock Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days DiamondRock Hospitality has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SHIN-ETSU CHEMICAL and DiamondRock Hospitality

The main advantage of trading using opposite SHIN-ETSU CHEMICAL and DiamondRock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN-ETSU CHEMICAL position performs unexpectedly, DiamondRock Hospitality 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 DiamondRock Hospitality will offset losses from the drop in DiamondRock Hospitality's long position.

The idea behind SHIN ETSU CHEMICAL and DiamondRock Hospitality 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.