Correlation Between Shin-Etsu Chemical and NanoXplore

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

Diversification Opportunities for Shin-Etsu Chemical and NanoXplore

-0.41

Correlation Coefficient

Shin-Etsu Chemical  NanoXplore

Very good diversification

The 3 months correlation between Shin-Etsu and NanoXplore is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and NanoXplore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NanoXplore 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 NanoXplore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NanoXplore has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and NanoXplore go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and NanoXplore

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 1.0 times more return on investment than NanoXplore. However, Shin Etsu Chemical Co is 1.0 times less risky than NanoXplore. It trades about 0.02 of its potential returns per unit of risk. NanoXplore is currently generating about 0.0 per unit of risk. If you would invest  2,648  in Shin Etsu Chemical Co on November 20, 2024 and sell it today you would earn a total of  323.00  from holding Shin Etsu Chemical Co or generate 12.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shin Etsu Chemical Co  vs.  NanoXplore

Shin Etsu Chemical

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NanoXplore

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NanoXplore are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NanoXplore is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shin-Etsu Chemical and NanoXplore

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

The idea behind Shin Etsu Chemical Co and NanoXplore 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.