Correlation Between SHIN-ETSU CHEMICAL and Sanyo Chemical
Can any of the company-specific risk be diversified away by investing in both SHIN-ETSU CHEMICAL and Sanyo 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 SHIN-ETSU CHEMICAL and Sanyo Chemical 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 Sanyo Chemical Industries, you can compare the effects of market volatilities on SHIN-ETSU CHEMICAL and Sanyo 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 SHIN-ETSU CHEMICAL with a short position of Sanyo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN-ETSU CHEMICAL and Sanyo Chemical.
Diversification Opportunities for SHIN-ETSU CHEMICAL and Sanyo Chemical
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SHIN-ETSU and Sanyo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and Sanyo Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Chemical Industries 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 Sanyo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Chemical Industries has no effect on the direction of SHIN-ETSU CHEMICAL i.e., SHIN-ETSU CHEMICAL and Sanyo Chemical go up and down completely randomly.
Pair Corralation between SHIN-ETSU CHEMICAL and Sanyo Chemical
Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 1.59 times more return on investment than Sanyo Chemical. However, SHIN-ETSU CHEMICAL is 1.59 times more volatile than Sanyo Chemical Industries. It trades about 0.14 of its potential returns per unit of risk. Sanyo Chemical Industries is currently generating about 0.0 per unit of risk. If you would invest 3,356 in SHIN ETSU CHEMICAL on September 2, 2024 and sell it today you would earn a total of 143.00 from holding SHIN ETSU CHEMICAL or generate 4.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SHIN ETSU CHEMICAL vs. Sanyo Chemical Industries
Performance |
| Timeline |
| SHIN ETSU CHEMICAL |
| Sanyo Chemical Industries |
SHIN-ETSU CHEMICAL and Sanyo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SHIN-ETSU CHEMICAL and Sanyo Chemical
The main advantage of trading using opposite SHIN-ETSU CHEMICAL and Sanyo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN-ETSU CHEMICAL position performs unexpectedly, Sanyo 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 Sanyo Chemical will offset losses from the drop in Sanyo Chemical'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 |
| Sanyo Chemical vs. The Sherwin Williams | Sanyo Chemical vs. SIKA AG UNSPADR | Sanyo Chemical vs. LyondellBasell Industries NV | Sanyo Chemical vs. Albemarle |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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