Correlation Between Strategic Education and Shin Etsu

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

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

Diversification Opportunities for Strategic Education and Shin Etsu

-0.56

Correlation Coefficient

Strategic Education  Shin Etsu

Excellent diversification

The 3 months correlation between Strategic and Shin is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Education and Shin Etsu Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Etsu Chemical and Strategic Education 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 Strategic Education are associated (or correlated) with Shin Etsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Etsu Chemical has no effect on the direction of Strategic Education i.e., Strategic Education and Shin Etsu go up and down completely randomly.

Pair Corralation between Strategic Education and Shin Etsu

Assuming the 90 days horizon Strategic Education is expected to generate 1.0 times less return on investment than Shin Etsu. But when comparing it to its historical volatility, Strategic Education is 1.1 times less risky than Shin Etsu. It trades about 0.04 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,357  in Shin Etsu Chemical Co on September 23, 2024 and sell it today you would earn a total of  701.00  from holding Shin Etsu Chemical Co or generate 29.74% return on investment over 90 days.

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

Strategic Education  vs.  Shin Etsu Chemical Co

Strategic Education

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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

Pair Trading with Strategic Education and Shin Etsu

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

The idea behind Strategic Education and Shin Etsu Chemical 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.