Correlation Between United States and Sekisui Chemical

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

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

Diversification Opportunities for United States and Sekisui Chemical

0.21

Correlation Coefficient

United States  Sekisui Chemical

Modest diversification

The 3 months correlation between United and Sekisui is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical and United States 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 United States Steel are associated (or correlated) with Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of United States i.e., United States and Sekisui Chemical go up and down completely randomly.

Pair Corralation between United States and Sekisui Chemical

Assuming the 90 days trading horizon United States Steel is expected to generate 2.01 times more return on investment than Sekisui Chemical. However, United States is 2.01 times more volatile than Sekisui Chemical Co. It trades about 0.2 of its potential returns per unit of risk. Sekisui Chemical Co is currently generating about -0.01 per unit of risk. If you would invest  2,975  in United States Steel on December 30, 2024 and sell it today you would earn a total of  1,225  from holding United States Steel or generate 41.18% return on investment over 90 days.

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

United States Steel  vs.  Sekisui Chemical Co

United States Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United States and Sekisui Chemical

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

The idea behind United States Steel and Sekisui 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.