Correlation Between Shin-Etsu Chemical and Minerals Technologies

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

Diversification Opportunities for Shin-Etsu Chemical and Minerals Technologies

-0.4

Correlation Coefficient

Shin-Etsu Chemical  Minerals Technologies

Very good diversification

The 3 months correlation between Shin-Etsu and Minerals is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Minerals Technologies go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and Minerals Technologies

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the Minerals Technologies. In addition to that, Shin-Etsu Chemical is 1.0 times more volatile than Minerals Technologies. It trades about -0.09 of its total potential returns per unit of risk. Minerals Technologies is currently generating about 0.06 per unit of volatility. If you would invest  6,839  in Minerals Technologies on October 8, 2024 and sell it today you would earn a total of  411.00  from holding Minerals Technologies or generate 6.01% 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.  Minerals Technologies

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.

Minerals Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Minerals Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shin-Etsu Chemical and Minerals Technologies

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

The idea behind Shin Etsu Chemical Co and Minerals Technologies 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.