Correlation Between SHIN ETSU and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both SHIN ETSU and Fevertree Drinks 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 Fevertree Drinks 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 Fevertree Drinks PLC, you can compare the effects of market volatilities on SHIN ETSU and Fevertree Drinks 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 Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIN ETSU and Fevertree Drinks.
Diversification Opportunities for SHIN ETSU and Fevertree Drinks
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SHIN and Fevertree is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SHIN ETSU CHEMICAL and Fevertree Drinks PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks PLC 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 are associated (or correlated) with Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks PLC has no effect on the direction of SHIN ETSU i.e., SHIN ETSU and Fevertree Drinks go up and down completely randomly.
Pair Corralation between SHIN ETSU and Fevertree Drinks
Assuming the 90 days trading horizon SHIN ETSU CHEMICAL is expected to under-perform the Fevertree Drinks. But the stock apears to be less risky and, when comparing its historical volatility, SHIN ETSU CHEMICAL is 1.27 times less risky than Fevertree Drinks. The stock trades about -0.37 of its potential returns per unit of risk. The Fevertree Drinks PLC is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 825.00 in Fevertree Drinks PLC on September 24, 2024 and sell it today you would lose (25.00) from holding Fevertree Drinks PLC or give up 3.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SHIN ETSU CHEMICAL vs. Fevertree Drinks PLC
Performance |
| Timeline |
| SHIN ETSU CHEMICAL |
| Fevertree Drinks PLC |
SHIN ETSU and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SHIN ETSU and Fevertree Drinks
The main advantage of trading using opposite SHIN ETSU and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SHIN ETSU position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.| SHIN ETSU vs. Lendlease Group | SHIN ETSU vs. LION ONE METALS | SHIN ETSU vs. United Rentals | SHIN ETSU vs. TELES Informationstechnologien AG |
| Fevertree Drinks vs. HANOVER INSURANCE | Fevertree Drinks vs. INSURANCE AUST GRP | Fevertree Drinks vs. Selective Insurance Group | Fevertree Drinks vs. SHIN ETSU CHEMICAL |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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