Correlation Between Treasury Wine and Shin Etsu

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

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

Diversification Opportunities for Treasury Wine and Shin Etsu

0.49

Correlation Coefficient

Treasury Wine  Shin Etsu

Very weak diversification

The 3 months correlation between Treasury and Shin is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates 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 Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Shin Etsu go up and down completely randomly.

Pair Corralation between Treasury Wine and Shin Etsu

Assuming the 90 days horizon Treasury Wine Estates is expected to generate 0.64 times more return on investment than Shin Etsu. However, Treasury Wine Estates is 1.56 times less risky than Shin Etsu. It trades about -0.08 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.26 per unit of risk. If you would invest  695.00  in Treasury Wine Estates on September 23, 2024 and sell it today you would lose (16.00) from holding Treasury Wine Estates or give up 2.3% of portfolio value over 90 days.

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

Treasury Wine Estates  vs.  Shin Etsu Chemical Co

Treasury Wine Estates

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Treasury Wine Estates are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Treasury Wine is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Treasury Wine and Shin Etsu

The main advantage of trading using opposite Treasury Wine and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.