Correlation Between SHIN-ETSU CHEMICAL and Goodyear Tire
Can any of the company-specific risk be diversified away by investing in both SHIN-ETSU CHEMICAL and Goodyear Tire 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 SHIN-ETSU CHEMICAL and Goodyear Tire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SHIN ETSU CHEMICAL and Goodyear Tire Rubber, you can compare the effects of market volatilities on SHIN-ETSU CHEMICAL and Goodyear Tire 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 SHIN-ETSU CHEMICAL with a short position of Goodyear Tire. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN-ETSU CHEMICAL and Goodyear Tire.
Diversification Opportunities for SHIN-ETSU CHEMICAL and Goodyear Tire
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SHIN-ETSU and Goodyear is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber and SHIN-ETSU 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 SHIN ETSU CHEMICAL are associated (or correlated) with Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of SHIN-ETSU CHEMICAL i.e., SHIN-ETSU CHEMICAL and Goodyear Tire go up and down completely randomly.
Pair Corralation between SHIN-ETSU CHEMICAL and Goodyear Tire
Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 0.66 times more return on investment than Goodyear Tire. However, SHIN ETSU CHEMICAL is 1.51 times less risky than Goodyear Tire. It trades about 0.05 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about 0.01 per unit of risk. If you would invest 2,355 in SHIN ETSU CHEMICAL on September 2, 2024 and sell it today you would earn a total of 1,144 from holding SHIN ETSU CHEMICAL or generate 48.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SHIN ETSU CHEMICAL vs. Goodyear Tire Rubber
Performance |
| Timeline |
| SHIN ETSU CHEMICAL |
| Goodyear Tire Rubber |
SHIN-ETSU CHEMICAL and Goodyear Tire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SHIN-ETSU CHEMICAL and Goodyear Tire
The main advantage of trading using opposite SHIN-ETSU CHEMICAL and Goodyear Tire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN-ETSU CHEMICAL position performs unexpectedly, Goodyear Tire 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 Goodyear Tire will offset losses from the drop in Goodyear Tire's long position.| SHIN-ETSU CHEMICAL vs. SIVERS SEMICONDUCTORS AB | SHIN-ETSU CHEMICAL vs. Darden Restaurants | SHIN-ETSU CHEMICAL vs. Reliance Steel Aluminum | SHIN-ETSU CHEMICAL vs. Q2M Managementberatung AG |
| Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc | Goodyear Tire vs. Apple Inc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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