Correlation Between Givaudan and Shin Etsu
Can any of the company-specific risk be diversified away by investing in both Givaudan 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 Givaudan and Shin Etsu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Givaudan SA ADR and Shin Etsu Chemical Co, you can compare the effects of market volatilities on Givaudan 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 Givaudan with a short position of Shin Etsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Givaudan and Shin Etsu.
Diversification Opportunities for Givaudan and Shin Etsu
Poor diversification
The 3 months correlation between Givaudan and Shin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Givaudan SA ADR 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 Givaudan 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 Givaudan SA ADR 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 Givaudan i.e., Givaudan and Shin Etsu go up and down completely randomly.
Pair Corralation between Givaudan and Shin Etsu
Assuming the 90 days horizon Givaudan SA ADR is expected to generate 0.72 times more return on investment than Shin Etsu. However, Givaudan SA ADR is 1.39 times less risky than Shin Etsu. It trades about -0.21 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.17 per unit of risk. If you would invest 10,318 in Givaudan SA ADR on August 28, 2024 and sell it today you would lose (1,523) from holding Givaudan SA ADR or give up 14.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Givaudan SA ADR vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| Givaudan SA ADR |
| Shin Etsu Chemical |
Givaudan and Shin Etsu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Givaudan and Shin Etsu
The main advantage of trading using opposite Givaudan and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Givaudan 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 Givaudan SA ADR 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.| Shin Etsu vs. BASF SE NA | Shin Etsu vs. BASF SE ADR | Shin Etsu vs. Braskem SA Class | Shin Etsu vs. Celanese |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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