Correlation Between Consolidated Communications and Shin-Etsu Chemical
Can any of the company-specific risk be diversified away by investing in both Consolidated Communications 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 Consolidated Communications 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 Consolidated Communications Holdings and Shin Etsu Chemical Co, you can compare the effects of market volatilities on Consolidated Communications 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 Consolidated Communications with a short position of Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and Shin-Etsu Chemical.
Diversification Opportunities for Consolidated Communications and Shin-Etsu Chemical
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consolidated and Shin-Etsu is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho 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 Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and Shin-Etsu Chemical go up and down completely randomly.
Pair Corralation between Consolidated Communications and Shin-Etsu Chemical
Assuming the 90 days horizon Consolidated Communications Holdings is expected to under-perform the Shin-Etsu Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Consolidated Communications Holdings is 11.98 times less risky than Shin-Etsu Chemical. The stock trades about -0.41 of its potential returns per unit of risk. The Shin Etsu Chemical Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 3,180 in Shin Etsu Chemical Co on October 20, 2024 and sell it today you would lose (13.00) from holding Shin Etsu Chemical Co or give up 0.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 35.29% |
| Values | Daily Returns |
Consolidated Communications Ho vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| Consolidated Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Shin Etsu Chemical |
Consolidated Communications and Shin-Etsu Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Communications and Shin-Etsu Chemical
The main advantage of trading using opposite Consolidated Communications and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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.The idea behind Consolidated Communications Holdings 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.
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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