Correlation Between Sanyo Chemical and NISSHA CO

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

By analyzing existing cross correlation between Sanyo Chemical Industries and NISSHA LTD, you can compare the effects of market volatilities on Sanyo Chemical and NISSHA CO 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 Sanyo Chemical with a short position of NISSHA CO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sanyo Chemical and NISSHA CO.

Diversification Opportunities for Sanyo Chemical and NISSHA CO

-0.66

Correlation Coefficient

Sanyo Chemical  NISSHA CO

Excellent diversification

The 3 months correlation between Sanyo and NISSHA is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sanyo Chemical Industries and NISSHA LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSHA LTD and Sanyo 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 Sanyo Chemical Industries are associated (or correlated) with NISSHA CO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSHA LTD has no effect on the direction of Sanyo Chemical i.e., Sanyo Chemical and NISSHA CO go up and down completely randomly.

Pair Corralation between Sanyo Chemical and NISSHA CO

Assuming the 90 days horizon Sanyo Chemical Industries is expected to generate 0.83 times more return on investment than NISSHA CO. However, Sanyo Chemical Industries is 1.2 times less risky than NISSHA CO. It trades about 0.01 of its potential returns per unit of risk. NISSHA LTD is currently generating about -0.06 per unit of risk. If you would invest  2,400  in Sanyo Chemical Industries on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Sanyo Chemical Industries or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Sanyo Chemical Industries  vs.  NISSHA LTD

Sanyo Chemical Industries

Risk-Adjusted Performance

Very Weak

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

NISSHA LTD

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sanyo Chemical and NISSHA CO

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

The idea behind Sanyo Chemical Industries and NISSHA LTD 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.