Correlation Between Shin Etsu and GREENLIGHT CAP

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

Diversification Opportunities for Shin Etsu and GREENLIGHT CAP

-0.5

Correlation Coefficient

Shin Etsu  GREENLIGHT CAP

Very good diversification

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

Pair Corralation between Shin Etsu and GREENLIGHT CAP

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the GREENLIGHT CAP. In addition to that, Shin Etsu is 1.95 times more volatile than GREENLIGHT CAP RE. It trades about -0.26 of its total potential returns per unit of risk. GREENLIGHT CAP RE is currently generating about -0.3 per unit of volatility. If you would invest  1,420  in GREENLIGHT CAP RE on September 23, 2024 and sell it today you would lose (90.00) from holding GREENLIGHT CAP RE or give up 6.34% of portfolio value 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.  GREENLIGHT CAP RE

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GREENLIGHT CAP RE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GREENLIGHT CAP RE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, GREENLIGHT CAP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Shin Etsu and GREENLIGHT CAP

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

The idea behind Shin Etsu Chemical Co and GREENLIGHT CAP RE 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.