Correlation Between Shin Etsu and AIR PRODCHEMICALS

Can any of the company-specific risk be diversified away by investing in both Shin Etsu and AIR PRODCHEMICALS 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 and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Shin Etsu and AIR PRODCHEMICALS

-0.5

Correlation Coefficient

Shin Etsu  AIR PRODCHEMICALS

Very good diversification

The 3 months correlation between Shin and AIR is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and Shin Etsu 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 Co are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Shin Etsu i.e., Shin Etsu and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between Shin Etsu and AIR PRODCHEMICALS

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the AIR PRODCHEMICALS. In addition to that, Shin Etsu is 1.22 times more volatile than AIR PRODCHEMICALS. It trades about -0.06 of its total potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.17 per unit of volatility. If you would invest  25,501  in AIR PRODCHEMICALS on September 15, 2024 and sell it today you would earn a total of  4,249  from holding AIR PRODCHEMICALS or generate 16.66% return on investment over 90 days.

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

Shin Etsu Chemical Co  vs.  AIR PRODCHEMICALS

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AIR PRODCHEMICALS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AIR PRODCHEMICALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin Etsu and AIR PRODCHEMICALS

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

The idea behind Shin Etsu Chemical Co and AIR PRODCHEMICALS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.