Correlation Between Shin-Etsu Chemical and BYD Company
Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical and BYD Company 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 BYD Company 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 BYD Company Limited, you can compare the effects of market volatilities on Shin-Etsu Chemical and BYD Company 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 BYD Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and BYD Company.
Diversification Opportunities for Shin-Etsu Chemical and BYD Company
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Shin-Etsu and BYD is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited 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 Co are associated (or correlated) with BYD Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Limited has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and BYD Company go up and down completely randomly.
Pair Corralation between Shin-Etsu Chemical and BYD Company
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.84 times more return on investment than BYD Company. However, Shin Etsu Chemical Co is 1.19 times less risky than BYD Company. It trades about 0.11 of its potential returns per unit of risk. BYD Company Limited is currently generating about -0.01 per unit of risk. If you would invest 3,058 in Shin Etsu Chemical Co on October 21, 2024 and sell it today you would earn a total of 109.00 from holding Shin Etsu Chemical Co or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Etsu Chemical Co vs. BYD Company Limited
Performance |
| Timeline |
| Shin Etsu Chemical |
| BYD Limited |
Shin-Etsu Chemical and BYD Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin-Etsu Chemical and BYD Company
The main advantage of trading using opposite Shin-Etsu Chemical and BYD Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin-Etsu Chemical position performs unexpectedly, BYD Company 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 BYD Company will offset losses from the drop in BYD Company's long position.| Shin-Etsu Chemical vs. CHRYSALIS INVESTMENTS LTD | Shin-Etsu Chemical vs. CITY OFFICE REIT | Shin-Etsu Chemical vs. MEDCAW INVESTMENTS LS 01 | Shin-Etsu Chemical vs. HAVERTY FURNITURE A |
| BYD Company vs. Tesla Inc | BYD Company vs. Toyota Motor | BYD Company vs. BYD Company Limited | BYD Company vs. MERCEDES BENZ GRP ADR14 |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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