Correlation Between SHIN ETSU and WisdomTree Investments

Can any of the company-specific risk be diversified away by investing in both SHIN ETSU and WisdomTree Investments 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 WisdomTree Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SHIN ETSU CHEMICAL and WisdomTree Investments, you can compare the effects of market volatilities on SHIN ETSU and WisdomTree Investments 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 WisdomTree Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN ETSU and WisdomTree Investments.

Diversification Opportunities for SHIN ETSU and WisdomTree Investments

-0.61

Correlation Coefficient

SHIN ETSU  WisdomTree Investments

Excellent diversification

The 3 months correlation between SHIN and WisdomTree is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and WisdomTree Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Investments 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 are associated (or correlated) with WisdomTree Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Investments has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and WisdomTree Investments go up and down completely randomly.

Pair Corralation between SHIN ETSU and WisdomTree Investments

Assuming the 90 days trading horizon SHIN ETSU is expected to generate 1.91 times less return on investment than WisdomTree Investments. But when comparing it to its historical volatility, SHIN ETSU CHEMICAL is 1.0 times less risky than WisdomTree Investments. It trades about 0.04 of its potential returns per unit of risk. WisdomTree Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  512.00  in WisdomTree Investments on September 24, 2024 and sell it today you would earn a total of  489.00  from holding WisdomTree Investments or generate 95.51% return on investment over 90 days.

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

SHIN ETSU CHEMICAL  vs.  WisdomTree Investments

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

WisdomTree Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WisdomTree Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHIN ETSU and WisdomTree Investments

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

The idea behind SHIN ETSU CHEMICAL and WisdomTree Investments 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.