Correlation Between Stephan and Shiseido

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

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

Diversification Opportunities for Stephan and Shiseido

-0.67

Correlation Coefficient

Stephan  Shiseido

Excellent diversification

The 3 months correlation between Stephan and Shiseido is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Stephan Co and Shiseido Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiseido and Stephan 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 The Stephan Co are associated (or correlated) with Shiseido. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiseido has no effect on the direction of Stephan i.e., Stephan and Shiseido go up and down completely randomly.

Pair Corralation between Stephan and Shiseido

If you would invest  1,772  in Shiseido Company on September 16, 2024 and sell it today you would earn a total of  66.00  from holding Shiseido Company or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

The Stephan Co  vs.  Shiseido Company

The Stephan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Stephan Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Stephan is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Shiseido

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shiseido Company 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Stephan and Shiseido

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

The idea behind The Stephan Co and Shiseido Company 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.