Correlation Between Shin Etsu and CTS Eventim

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

Diversification Opportunities for Shin Etsu and CTS Eventim

0.18

Correlation Coefficient

Shin Etsu  CTS Eventim

Average diversification

The 3 months correlation between Shin and CTS is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and CTS Eventim AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTS Eventim AG 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 CTS Eventim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTS Eventim AG has no effect on the direction of Shin Etsu i.e., Shin Etsu and CTS Eventim go up and down completely randomly.

Pair Corralation between Shin Etsu and CTS Eventim

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.66 times more return on investment than CTS Eventim. However, Shin Etsu Chemical Co is 1.52 times less risky than CTS Eventim. It trades about 0.0 of its potential returns per unit of risk. CTS Eventim AG is currently generating about -0.13 per unit of risk. If you would invest  3,381  in Shin Etsu Chemical Co on September 14, 2024 and sell it today you would lose (12.00) from holding Shin Etsu Chemical Co or give up 0.35% of portfolio value over 90 days.

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

Shin Etsu Chemical Co  vs.  CTS Eventim AG

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 nearly stable basic indicators, Shin Etsu is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CTS Eventim AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTS Eventim AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CTS Eventim is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shin Etsu and CTS Eventim

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

The idea behind Shin Etsu Chemical Co and CTS Eventim AG 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.