Correlation Between SHIN ETSU and RLX TECH

Can any of the company-specific risk be diversified away by investing in both SHIN ETSU and RLX TECH 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 RLX TECH 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 RLX TECH SPADR1, you can compare the effects of market volatilities on SHIN ETSU and RLX TECH 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 RLX TECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN ETSU and RLX TECH.

Diversification Opportunities for SHIN ETSU and RLX TECH

-0.53

Correlation Coefficient

SHIN ETSU  RLX TECH

Excellent diversification

The 3 months correlation between SHIN and RLX is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and RLX TECH SPADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX TECH SPADR1 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 RLX TECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX TECH SPADR1 has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and RLX TECH go up and down completely randomly.

Pair Corralation between SHIN ETSU and RLX TECH

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 0.64 times more return on investment than RLX TECH. However, SHIN ETSU CHEMICAL is 1.56 times less risky than RLX TECH. It trades about 0.04 of its potential returns per unit of risk. RLX TECH SPADR1 is currently generating about 0.01 per unit of risk. If you would invest  2,249  in SHIN ETSU CHEMICAL on September 29, 2024 and sell it today you would earn a total of  952.00  from holding SHIN ETSU CHEMICAL or generate 42.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

SHIN ETSU CHEMICAL  vs.  RLX TECH SPADR1

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

RLX TECH SPADR1

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLX TECH SPADR1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, RLX TECH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHIN ETSU and RLX TECH

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

The idea behind SHIN ETSU CHEMICAL and RLX TECH SPADR1 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.