Correlation Between Shin-Etsu Chemical and Cars
Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical and Cars 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 Cars 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 Cars Inc, you can compare the effects of market volatilities on Shin-Etsu Chemical and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and Cars.
Diversification Opportunities for Shin-Etsu Chemical and Cars
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Shin-Etsu and Cars is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Cars go up and down completely randomly.
Pair Corralation between Shin-Etsu Chemical and Cars
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to under-perform the Cars. But the stock apears to be less risky and, when comparing its historical volatility, Shin Etsu Chemical Co is 1.36 times less risky than Cars. The stock trades about -0.09 of its potential returns per unit of risk. The Cars Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,590 in Cars Inc on September 3, 2024 and sell it today you would earn a total of 260.00 from holding Cars Inc or generate 16.35% 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 Co vs. Cars Inc
Performance |
| Timeline |
| Shin Etsu Chemical |
| Cars Inc |
Shin-Etsu Chemical and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin-Etsu Chemical and Cars
The main advantage of trading using opposite Shin-Etsu Chemical and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin-Etsu Chemical position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Shin-Etsu Chemical vs. AIR LIQUIDE ADR | Shin-Etsu Chemical vs. BASF SE | Shin-Etsu Chemical vs. BASF SE | Shin-Etsu Chemical vs. BASF SE |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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