Correlation Between Shin Etsu and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Shin Etsu and Sumitomo 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 and Sumitomo 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 Co and Sumitomo Chemical, you can compare the effects of market volatilities on Shin Etsu and Sumitomo 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 with a short position of Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Etsu and Sumitomo Chemical.
Diversification Opportunities for Shin Etsu and Sumitomo Chemical
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shin and Sumitomo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Shin Etsu i.e., Shin Etsu and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Shin Etsu and Sumitomo Chemical
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 1.11 times more return on investment than Sumitomo Chemical. However, Shin Etsu is 1.11 times more volatile than Sumitomo Chemical. It trades about 0.2 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.11 per unit of risk. If you would invest 3,328 in Shin Etsu Chemical Co on August 29, 2024 and sell it today you would earn a total of 229.00 from holding Shin Etsu Chemical Co or generate 6.88% 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 Co vs. Sumitomo Chemical
Performance |
| Timeline |
| Shin Etsu Chemical |
| Sumitomo Chemical |
Shin Etsu and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Etsu and Sumitomo Chemical
The main advantage of trading using opposite Shin Etsu and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Etsu position performs unexpectedly, Sumitomo 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Shin Etsu vs. Carsales | Shin Etsu vs. MGIC INVESTMENT | Shin Etsu vs. Grupo Carso SAB | Shin Etsu vs. SLR Investment Corp |
| Sumitomo Chemical vs. Air Liquide SA | Sumitomo Chemical vs. AIR LIQUIDE ADR | Sumitomo Chemical vs. Air Products and | Sumitomo Chemical vs. Shin Etsu Chemical Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |