Correlation Between Shin Etsu and Ganfeng Lithium
Can any of the company-specific risk be diversified away by investing in both Shin Etsu and Ganfeng Lithium 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 and Ganfeng Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shin Etsu Chemical Co and Ganfeng Lithium Co, you can compare the effects of market volatilities on Shin Etsu and Ganfeng Lithium 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 with a short position of Ganfeng Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Etsu and Ganfeng Lithium.
Diversification Opportunities for Shin Etsu and Ganfeng Lithium
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shin and Ganfeng is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Ganfeng Lithium Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ganfeng Lithium and Shin Etsu 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 Co are associated (or correlated) with Ganfeng Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ganfeng Lithium has no effect on the direction of Shin Etsu i.e., Shin Etsu and Ganfeng Lithium go up and down completely randomly.
Pair Corralation between Shin Etsu and Ganfeng Lithium
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the Ganfeng Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Shin Etsu Chemical Co is 2.26 times less risky than Ganfeng Lithium. The stock trades about -0.05 of its potential returns per unit of risk. The Ganfeng Lithium Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 168.00 in Ganfeng Lithium Co on November 21, 2024 and sell it today you would earn a total of 105.00 from holding Ganfeng Lithium Co or generate 62.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Shin Etsu Chemical Co vs. Ganfeng Lithium Co
Performance |
Timeline |
Shin Etsu Chemical |
Ganfeng Lithium |
Shin Etsu and Ganfeng Lithium Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Shin Etsu and Ganfeng Lithium
The main advantage of trading using opposite Shin Etsu and Ganfeng Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Etsu position performs unexpectedly, Ganfeng Lithium 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 Ganfeng Lithium will offset losses from the drop in Ganfeng Lithium's long position.Shin Etsu vs. NAKED WINES PLC | ||
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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