Correlation Between Shin-Etsu Chemical and AdvanSix

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Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical and AdvanSix 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 AdvanSix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shin Etsu Chemical Co and AdvanSix, you can compare the effects of market volatilities on Shin-Etsu Chemical and AdvanSix 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 AdvanSix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and AdvanSix.

Diversification Opportunities for Shin-Etsu Chemical and AdvanSix

0.01
  Correlation Coefficient

Significant diversification

The 3 months correlation between Shin-Etsu and AdvanSix is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and AdvanSix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvanSix 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 Co are associated (or correlated) with AdvanSix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvanSix has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and AdvanSix go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and AdvanSix

Assuming the 90 days horizon Shin-Etsu Chemical is expected to generate 2.46 times less return on investment than AdvanSix. In addition to that, Shin-Etsu Chemical is 1.85 times more volatile than AdvanSix. It trades about 0.05 of its total potential returns per unit of risk. AdvanSix is currently generating about 0.23 per unit of volatility. If you would invest  2,837  in AdvanSix on August 31, 2024 and sell it today you would earn a total of  325.00  from holding AdvanSix or generate 11.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Shin Etsu Chemical Co  vs.  AdvanSix

 Performance 
       Timeline  
Shin Etsu Chemical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Shin Etsu Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Shin-Etsu Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
AdvanSix 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in AdvanSix are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, AdvanSix showed solid returns over the last few months and may actually be approaching a breakup point.

Shin-Etsu Chemical and AdvanSix Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Shin-Etsu Chemical and AdvanSix

The main advantage of trading using opposite Shin-Etsu Chemical and AdvanSix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin-Etsu Chemical position performs unexpectedly, AdvanSix 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 AdvanSix will offset losses from the drop in AdvanSix's long position.
The idea behind Shin Etsu Chemical Co and AdvanSix 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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