Correlation Between Shin Etsu and Whirlpool

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

Diversification Opportunities for Shin Etsu and Whirlpool

-0.55

Correlation Coefficient

Shin Etsu  Whirlpool

Excellent diversification

The 3 months correlation between Shin and Whirlpool is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of Shin Etsu i.e., Shin Etsu and Whirlpool go up and down completely randomly.

Pair Corralation between Shin Etsu and Whirlpool

Assuming the 90 days horizon Shin Etsu is expected to generate 2.01 times less return on investment than Whirlpool. In addition to that, Shin Etsu is 1.06 times more volatile than Whirlpool. It trades about 0.02 of its total potential returns per unit of risk. Whirlpool is currently generating about 0.04 per unit of volatility. If you would invest  9,519  in Whirlpool on September 15, 2024 and sell it today you would earn a total of  2,206  from holding Whirlpool or generate 23.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.64%
Values	Daily Returns

Shin Etsu Chemical Co  vs.  Whirlpool

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.

Whirlpool

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Whirlpool are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Whirlpool reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shin Etsu and Whirlpool

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

The idea behind Shin Etsu Chemical Co and Whirlpool 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.