Correlation Between Sekisui Chemical and AeroVironment

Can any of the company-specific risk be diversified away by investing in both Sekisui Chemical and AeroVironment 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 AeroVironment 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 AeroVironment, you can compare the effects of market volatilities on Sekisui Chemical and AeroVironment 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 AeroVironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sekisui Chemical and AeroVironment.

Diversification Opportunities for Sekisui Chemical and AeroVironment

-0.42

Correlation Coefficient

Sekisui Chemical  AeroVironment

Very good diversification

The 3 months correlation between Sekisui and AeroVironment is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui Chemical Co and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment 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 AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Sekisui Chemical i.e., Sekisui Chemical and AeroVironment go up and down completely randomly.

Pair Corralation between Sekisui Chemical and AeroVironment

Assuming the 90 days horizon Sekisui Chemical Co is expected to generate 0.5 times more return on investment than AeroVironment. However, Sekisui Chemical Co is 1.99 times less risky than AeroVironment. It trades about 0.0 of its potential returns per unit of risk. AeroVironment is currently generating about -0.14 per unit of risk. If you would invest  1,650  in Sekisui Chemical Co on December 25, 2024 and sell it today you would lose (10.00) from holding Sekisui Chemical Co or give up 0.61% of portfolio value over 90 days.

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

Sekisui Chemical Co  vs.  AeroVironment

Sekisui Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sekisui Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sekisui Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

AeroVironment

Risk-Adjusted Performance

Very Weak

Over the last 90 days AeroVironment 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sekisui Chemical and AeroVironment

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

The idea behind Sekisui Chemical Co and AeroVironment 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.