Correlation Between Sekisui Chemical and RWE Aktiengesellscha

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

Diversification Opportunities for Sekisui Chemical and RWE Aktiengesellscha

-0.47

Correlation Coefficient

Sekisui Chemical  RWE Aktiengesellscha

Very good diversification

The 3 months correlation between Sekisui and RWE is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui Chemical Co and RWE Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE Aktiengesellschaft 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 RWE Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE Aktiengesellschaft has no effect on the direction of Sekisui Chemical i.e., Sekisui Chemical and RWE Aktiengesellscha go up and down completely randomly.

Pair Corralation between Sekisui Chemical and RWE Aktiengesellscha

Assuming the 90 days horizon Sekisui Chemical is expected to generate 1.04 times less return on investment than RWE Aktiengesellscha. In addition to that, Sekisui Chemical is 1.69 times more volatile than RWE Aktiengesellschaft. It trades about 0.05 of its total potential returns per unit of risk. RWE Aktiengesellschaft is currently generating about 0.09 per unit of volatility. If you would invest  2,760  in RWE Aktiengesellschaft on October 23, 2024 and sell it today you would earn a total of  80.00  from holding RWE Aktiengesellschaft or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

Sekisui Chemical Co  vs.  RWE Aktiengesellschaft

Sekisui Chemical

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sekisui Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

RWE Aktiengesellschaft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RWE Aktiengesellschaft has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sekisui Chemical and RWE Aktiengesellscha

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

The idea behind Sekisui Chemical Co and RWE Aktiengesellschaft 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.