Correlation Between Shin-Etsu Chemical and Nissan Chemical

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

Diversification Opportunities for Shin-Etsu Chemical and Nissan Chemical

0.52

Correlation Coefficient

Shin-Etsu Chemical  Nissan Chemical

Very weak diversification

The 3 months correlation between Shin-Etsu and Nissan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Nissan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Chemical Indu 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 Nissan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Chemical Indu has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Nissan Chemical go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and Nissan Chemical

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.42 times more return on investment than Nissan Chemical. However, Shin Etsu Chemical Co is 2.35 times less risky than Nissan Chemical. It trades about 0.02 of its potential returns per unit of risk. Nissan Chemical Industries is currently generating about 0.0 per unit of risk. If you would invest  1,450  in Shin Etsu Chemical Co on October 5, 2024 and sell it today you would earn a total of  202.00  from holding Shin Etsu Chemical Co or generate 13.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.37%
Values	Daily Returns

Shin Etsu Chemical Co  vs.  Nissan Chemical Industries

Shin Etsu Chemical

Risk-Adjusted Performance

0 of 100

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. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nissan Chemical Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Nissan Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shin-Etsu Chemical and Nissan Chemical

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

The idea behind Shin Etsu Chemical Co and Nissan Chemical Industries 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.