Correlation Between Shin Etsu and TRADEDOUBLER

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

Diversification Opportunities for Shin Etsu and TRADEDOUBLER

-0.13

Correlation Coefficient

Shin Etsu  TRADEDOUBLER

Good diversification

The 3 months correlation between Shin and TRADEDOUBLER is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and TRADEDOUBLER AB SK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRADEDOUBLER AB SK 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 TRADEDOUBLER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRADEDOUBLER AB SK has no effect on the direction of Shin Etsu i.e., Shin Etsu and TRADEDOUBLER go up and down completely randomly.

Pair Corralation between Shin Etsu and TRADEDOUBLER

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.56 times more return on investment than TRADEDOUBLER. However, Shin Etsu Chemical Co is 1.78 times less risky than TRADEDOUBLER. It trades about -0.02 of its potential returns per unit of risk. TRADEDOUBLER AB SK is currently generating about -0.03 per unit of risk. If you would invest  3,547  in Shin Etsu Chemical Co on September 27, 2024 and sell it today you would lose (345.00) from holding Shin Etsu Chemical Co or give up 9.73% of portfolio value over 90 days.

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

Shin Etsu Chemical Co  vs.  TRADEDOUBLER AB SK

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TRADEDOUBLER AB SK

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TRADEDOUBLER AB SK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TRADEDOUBLER 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 TRADEDOUBLER

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

The idea behind Shin Etsu Chemical Co and TRADEDOUBLER AB SK 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.