Correlation Between Shin-Etsu Chemical and Sino Land

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

Diversification Opportunities for Shin-Etsu Chemical and Sino Land

-0.56

Correlation Coefficient

Shin-Etsu Chemical  Sino Land

Excellent diversification

The 3 months correlation between Shin-Etsu and Sino is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Sino Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Land 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 Sino Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Land has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Sino Land go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and Sino Land

Assuming the 90 days horizon Shin-Etsu Chemical is expected to generate 3.6 times less return on investment than Sino Land. But when comparing it to its historical volatility, Shin Etsu Chemical Co is 1.89 times less risky than Sino Land. It trades about 0.04 of its potential returns per unit of risk. Sino Land is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Sino Land on October 7, 2024 and sell it today you would earn a total of  67.00  from holding Sino Land or generate 223.33% 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.  Sino Land

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.

Sino Land

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Land are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sino Land reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin-Etsu Chemical and Sino Land

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

The idea behind Shin Etsu Chemical Co and Sino Land 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.