Correlation Between Shopify and Idemitsu Kosan

Can any of the company-specific risk be diversified away by investing in both Shopify and Idemitsu Kosan 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 Shopify and Idemitsu Kosan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shopify and Idemitsu Kosan Co, you can compare the effects of market volatilities on Shopify and Idemitsu Kosan 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 Shopify with a short position of Idemitsu Kosan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shopify and Idemitsu Kosan.

Diversification Opportunities for Shopify and Idemitsu Kosan

-0.26

Correlation Coefficient

Shopify  Idemitsu Kosan

Very good diversification

The 3 months correlation between Shopify and Idemitsu is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Idemitsu Kosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Idemitsu Kosan and Shopify 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 Shopify are associated (or correlated) with Idemitsu Kosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Idemitsu Kosan has no effect on the direction of Shopify i.e., Shopify and Idemitsu Kosan go up and down completely randomly.

Pair Corralation between Shopify and Idemitsu Kosan

Given the investment horizon of 90 days Shopify is expected to under-perform the Idemitsu Kosan. In addition to that, Shopify is 1.14 times more volatile than Idemitsu Kosan Co. It trades about -0.02 of its total potential returns per unit of risk. Idemitsu Kosan Co is currently generating about 0.12 per unit of volatility. If you would invest  1,239  in Idemitsu Kosan Co on December 21, 2024 and sell it today you would earn a total of  241.00  from holding Idemitsu Kosan Co or generate 19.45% return on investment over 90 days.

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

Shopify  vs.  Idemitsu Kosan Co

Shopify

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Shopify is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Idemitsu Kosan

Risk-Adjusted Performance

OK

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

Pair Trading with Shopify and Idemitsu Kosan

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

The idea behind Shopify and Idemitsu Kosan Co 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.