Correlation Between SHIN-ETSU CHEMICAL and EssilorLuxottica
Can any of the company-specific risk be diversified away by investing in both SHIN-ETSU CHEMICAL and EssilorLuxottica 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 EssilorLuxottica 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 EssilorLuxottica Socit anonyme, you can compare the effects of market volatilities on SHIN-ETSU CHEMICAL and EssilorLuxottica 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 EssilorLuxottica. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN-ETSU CHEMICAL and EssilorLuxottica.
Diversification Opportunities for SHIN-ETSU CHEMICAL and EssilorLuxottica
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SHIN-ETSU and EssilorLuxottica is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and EssilorLuxottica Socit anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EssilorLuxottica Socit 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 EssilorLuxottica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EssilorLuxottica Socit has no effect on the direction of SHIN-ETSU CHEMICAL i.e., SHIN-ETSU CHEMICAL and EssilorLuxottica go up and down completely randomly.
Pair Corralation between SHIN-ETSU CHEMICAL and EssilorLuxottica
Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to generate 1.72 times more return on investment than EssilorLuxottica. However, SHIN-ETSU CHEMICAL is 1.72 times more volatile than EssilorLuxottica Socit anonyme. It trades about 0.04 of its potential returns per unit of risk. EssilorLuxottica Socit anonyme is currently generating about 0.06 per unit of risk. If you would invest 2,420 in SHIN ETSU CHEMICAL on August 26, 2024 and sell it today you would earn a total of 1,047 from holding SHIN ETSU CHEMICAL or generate 43.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SHIN ETSU CHEMICAL vs. EssilorLuxottica Socit anonyme
Performance |
| Timeline |
| SHIN ETSU CHEMICAL |
| EssilorLuxottica Socit |
SHIN-ETSU CHEMICAL and EssilorLuxottica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SHIN-ETSU CHEMICAL and EssilorLuxottica
The main advantage of trading using opposite SHIN-ETSU CHEMICAL and EssilorLuxottica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN-ETSU CHEMICAL position performs unexpectedly, EssilorLuxottica 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 EssilorLuxottica will offset losses from the drop in EssilorLuxottica's long position.| SHIN-ETSU CHEMICAL vs. Apple Inc | SHIN-ETSU CHEMICAL vs. Apple Inc | SHIN-ETSU CHEMICAL vs. Apple Inc | SHIN-ETSU CHEMICAL vs. Apple Inc |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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