Correlation Between Shin-Etsu Chemical and Eastman Chemical

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

Diversification Opportunities for Shin-Etsu Chemical and Eastman Chemical

0.86

Correlation Coefficient

Shin-Etsu Chemical  Eastman Chemical

Very poor diversification

The 3 months correlation between Shin-Etsu and Eastman is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 Co are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Eastman Chemical go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and Eastman Chemical

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the Eastman Chemical. In addition to that, Shin-Etsu Chemical is 1.57 times more volatile than Eastman Chemical. It trades about -0.04 of its total potential returns per unit of risk. Eastman Chemical is currently generating about 0.13 per unit of volatility. If you would invest  8,768  in Eastman Chemical on October 24, 2024 and sell it today you would earn a total of  228.00  from holding Eastman Chemical or generate 2.6% return on investment over 90 days.

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

Shin Etsu Chemical Co  vs.  Eastman Chemical

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.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Pair Trading with Shin-Etsu Chemical and Eastman Chemical

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

The idea behind Shin Etsu Chemical Co and Eastman 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.