Correlation Between Australian Agricultural and Shin-Etsu Chemical
Can any of the company-specific risk be diversified away by investing in both Australian Agricultural and Shin-Etsu 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 Australian Agricultural and Shin-Etsu Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Australian Agricultural and Shin Etsu Chemical Co, you can compare the effects of market volatilities on Australian Agricultural and Shin-Etsu 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 Australian Agricultural with a short position of Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Australian Agricultural and Shin-Etsu Chemical.
Diversification Opportunities for Australian Agricultural and Shin-Etsu Chemical
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Australian and Shin-Etsu is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Australian Agricultural 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 Australian Agricultural 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 Australian Agricultural are associated (or correlated) with Shin-Etsu Chemical. 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 Australian Agricultural i.e., Australian Agricultural and Shin-Etsu Chemical go up and down completely randomly.
Pair Corralation between Australian Agricultural and Shin-Etsu Chemical
Assuming the 90 days horizon Australian Agricultural is expected to under-perform the Shin-Etsu Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Australian Agricultural is 1.17 times less risky than Shin-Etsu Chemical. The stock trades about -0.02 of its potential returns per unit of risk. The Shin Etsu Chemical Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,406 in Shin Etsu Chemical Co on August 25, 2024 and sell it today you would earn a total of 973.00 from holding Shin Etsu Chemical Co or generate 40.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Australian Agricultural vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| Australian Agricultural |
| Shin Etsu Chemical |
Australian Agricultural and Shin-Etsu Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Australian Agricultural and Shin-Etsu Chemical
The main advantage of trading using opposite Australian Agricultural and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Australian Agricultural position performs unexpectedly, Shin-Etsu 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 Shin-Etsu Chemical will offset losses from the drop in Shin-Etsu Chemical's long position.| Australian Agricultural vs. Corsair Gaming | Australian Agricultural vs. United Airlines Holdings | Australian Agricultural vs. Pentair plc | Australian Agricultural vs. Fair Isaac Corp |
| Shin-Etsu Chemical vs. BRIT AMER TOBACCO | Shin-Etsu Chemical vs. Australian Agricultural | Shin-Etsu Chemical vs. Hanison Construction Holdings | Shin-Etsu Chemical vs. NORTHEAST UTILITIES |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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