Correlation Between SHIN ETSU and BlueScope Steel

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

Diversification Opportunities for SHIN ETSU and BlueScope Steel

0.69

Correlation Coefficient

SHIN ETSU  BlueScope Steel

Poor diversification

The 3 months correlation between SHIN and BlueScope is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and BlueScope Steel go up and down completely randomly.

Pair Corralation between SHIN ETSU and BlueScope Steel

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 1.12 times more return on investment than BlueScope Steel. However, SHIN ETSU is 1.12 times more volatile than BlueScope Steel Limited. It trades about 0.04 of its potential returns per unit of risk. BlueScope Steel Limited is currently generating about 0.02 per unit of risk. If you would invest  2,264  in SHIN ETSU CHEMICAL on September 25, 2024 and sell it today you would earn a total of  841.00  from holding SHIN ETSU CHEMICAL or generate 37.15% return on investment over 90 days.

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

SHIN ETSU CHEMICAL  vs.  BlueScope Steel Limited

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.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Limited 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.

Pair Trading with SHIN ETSU and BlueScope Steel

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

The idea behind SHIN ETSU CHEMICAL and BlueScope Steel Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.