Correlation Between SHIN-ETSU CHEMICAL and COSTCO WHOLESALE

Can any of the company-specific risk be diversified away by investing in both SHIN-ETSU CHEMICAL and COSTCO WHOLESALE 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 CHEMICAL and COSTCO WHOLESALE 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 COSTCO WHOLESALE CDR, you can compare the effects of market volatilities on SHIN-ETSU CHEMICAL and COSTCO WHOLESALE 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 CHEMICAL with a short position of COSTCO WHOLESALE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN-ETSU CHEMICAL and COSTCO WHOLESALE.

Diversification Opportunities for SHIN-ETSU CHEMICAL and COSTCO WHOLESALE

0.06

Correlation Coefficient

SHIN-ETSU CHEMICAL  COSTCO WHOLESALE

Significant diversification

The 3 months correlation between SHIN-ETSU and COSTCO is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and COSTCO WHOLESALE CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSTCO WHOLESALE CDR and SHIN-ETSU CHEMICAL 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 COSTCO WHOLESALE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSTCO WHOLESALE CDR has no effect on the direction of SHIN-ETSU CHEMICAL i.e., SHIN-ETSU CHEMICAL and COSTCO WHOLESALE go up and down completely randomly.

Pair Corralation between SHIN-ETSU CHEMICAL and COSTCO WHOLESALE

Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to under-perform the COSTCO WHOLESALE. But the stock apears to be less risky and, when comparing its historical volatility, SHIN ETSU CHEMICAL is 1.17 times less risky than COSTCO WHOLESALE. The stock trades about -0.1 of its potential returns per unit of risk. The COSTCO WHOLESALE CDR is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,917  in COSTCO WHOLESALE CDR on December 23, 2024 and sell it today you would lose (317.00) from holding COSTCO WHOLESALE CDR or give up 10.87% of portfolio value over 90 days.

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

SHIN ETSU CHEMICAL  vs.  COSTCO WHOLESALE CDR

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

COSTCO WHOLESALE CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days COSTCO WHOLESALE CDR 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 CHEMICAL and COSTCO WHOLESALE

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

The idea behind SHIN ETSU CHEMICAL and COSTCO WHOLESALE CDR 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.