Correlation Between Shin Etsu and SHIN-ETSU CHEMICAL

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

Diversification Opportunities for Shin Etsu and SHIN-ETSU CHEMICAL

0.98

Correlation Coefficient

Shin Etsu  SHIN-ETSU CHEMICAL

Almost no diversification

The 3 months correlation between Shin and SHIN-ETSU is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL 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 SHIN-ETSU CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIN ETSU CHEMICAL has no effect on the direction of Shin Etsu i.e., Shin Etsu and SHIN-ETSU CHEMICAL go up and down completely randomly.

Pair Corralation between Shin Etsu and SHIN-ETSU CHEMICAL

Assuming the 90 days horizon Shin Etsu is expected to generate 1.06 times less return on investment than SHIN-ETSU CHEMICAL. In addition to that, Shin Etsu is 1.09 times more volatile than SHIN ETSU CHEMICAL. It trades about 0.03 of its total potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about 0.04 per unit of volatility. If you would invest  2,353  in SHIN ETSU CHEMICAL on October 4, 2024 and sell it today you would earn a total of  839.00  from holding SHIN ETSU CHEMICAL or generate 35.66% return on investment over 90 days.

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

Shin Etsu Chemical Co  vs.  SHIN ETSU 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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Shin Etsu and SHIN-ETSU CHEMICAL

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

The idea behind Shin Etsu Chemical Co and SHIN ETSU 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.