Correlation Between Sekisui Chemical and SIERRA MADRE

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

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

Diversification Opportunities for Sekisui Chemical and SIERRA MADRE

0.07

Correlation Coefficient

Sekisui Chemical  SIERRA MADRE

Significant diversification

The 3 months correlation between Sekisui and SIERRA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui Chemical Co and SIERRA MADRE GOLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA MADRE GOLD and Sekisui 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 Sekisui Chemical Co are associated (or correlated) with SIERRA MADRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA MADRE GOLD has no effect on the direction of Sekisui Chemical i.e., Sekisui Chemical and SIERRA MADRE go up and down completely randomly.

Pair Corralation between Sekisui Chemical and SIERRA MADRE

Assuming the 90 days horizon Sekisui Chemical is expected to generate 2.52 times less return on investment than SIERRA MADRE. But when comparing it to its historical volatility, Sekisui Chemical Co is 3.72 times less risky than SIERRA MADRE. It trades about 0.08 of its potential returns per unit of risk. SIERRA MADRE GOLD is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  35.00  in SIERRA MADRE GOLD on December 22, 2024 and sell it today you would earn a total of  3.00  from holding SIERRA MADRE GOLD or generate 8.57% return on investment over 90 days.

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

Sekisui Chemical Co  vs.  SIERRA MADRE GOLD

Sekisui Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sekisui Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SIERRA MADRE GOLD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIERRA MADRE GOLD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIERRA MADRE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sekisui Chemical and SIERRA MADRE

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

The idea behind Sekisui Chemical Co and SIERRA MADRE GOLD 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.