Correlation Between Shiseido Company and Secom Co

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

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

Diversification Opportunities for Shiseido Company and Secom Co

0.78

Correlation Coefficient

Shiseido Company  Secom Co

Poor diversification

The 3 months correlation between Shiseido and Secom is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Shiseido Company and Secom Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secom Co and Shiseido Company 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 Shiseido Company are associated (or correlated) with Secom Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secom Co has no effect on the direction of Shiseido Company i.e., Shiseido Company and Secom Co go up and down completely randomly.

Pair Corralation between Shiseido Company and Secom Co

Assuming the 90 days horizon Shiseido Company is expected to generate 2.52 times more return on investment than Secom Co. However, Shiseido Company is 2.52 times more volatile than Secom Co Ltd. It trades about 0.04 of its potential returns per unit of risk. Secom Co Ltd is currently generating about 0.03 per unit of risk. If you would invest  1,790  in Shiseido Company on December 27, 2024 and sell it today you would earn a total of  98.00  from holding Shiseido Company or generate 5.47% return on investment over 90 days.

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

Shiseido Company  vs.  Secom Co Ltd

Shiseido Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shiseido Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Shiseido Company may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Secom Co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Secom Co Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Secom Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shiseido Company and Secom Co

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

The idea behind Shiseido Company and Secom Co Ltd 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.