Correlation Between SHIN-ETSU CHEMICAL and CHINA TELECOM

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

Diversification Opportunities for SHIN-ETSU CHEMICAL and CHINA TELECOM

0.0

Correlation Coefficient

SHIN-ETSU CHEMICAL  CHINA TELECOM

Pay attention - limited upside

The 3 months correlation between SHIN-ETSU and CHINA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and CHINA TELECOM H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA TELECOM H 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 CHINA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA TELECOM H has no effect on the direction of SHIN-ETSU CHEMICAL i.e., SHIN-ETSU CHEMICAL and CHINA TELECOM go up and down completely randomly.

Pair Corralation between SHIN-ETSU CHEMICAL and CHINA TELECOM

Assuming the 90 days trading horizon SHIN-ETSU CHEMICAL is expected to generate 18.21 times less return on investment than CHINA TELECOM. But when comparing it to its historical volatility, SHIN ETSU CHEMICAL is 1.76 times less risky than CHINA TELECOM. It trades about 0.01 of its potential returns per unit of risk. CHINA TELECOM H is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  15.00  in CHINA TELECOM H on December 5, 2024 and sell it today you would earn a total of  37.00  from holding CHINA TELECOM H or generate 246.67% return on investment over 90 days.

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

SHIN ETSU CHEMICAL  vs.  CHINA TELECOM H

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

CHINA TELECOM H

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA TELECOM H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, CHINA TELECOM is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SHIN-ETSU CHEMICAL and CHINA TELECOM

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

The idea behind SHIN ETSU CHEMICAL and CHINA TELECOM H 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.