Correlation Between Shin Etsu and Celanese
Can any of the company-specific risk be diversified away by investing in both Shin Etsu and Celanese 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 Celanese 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 Celanese, you can compare the effects of market volatilities on Shin Etsu and Celanese 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 Celanese. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin Etsu and Celanese.
Diversification Opportunities for Shin Etsu and Celanese
Poor diversification
The 3 months correlation between Shin and Celanese is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Celanese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celanese 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 Celanese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celanese has no effect on the direction of Shin Etsu i.e., Shin Etsu and Celanese go up and down completely randomly.
Pair Corralation between Shin Etsu and Celanese
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 1.24 times more return on investment than Celanese. However, Shin Etsu is 1.24 times more volatile than Celanese. It trades about 0.04 of its potential returns per unit of risk. Celanese is currently generating about -0.02 per unit of risk. If you would invest 2,378 in Shin Etsu Chemical Co on August 24, 2024 and sell it today you would earn a total of 1,189 from holding Shin Etsu Chemical Co or generate 50.0% 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. Celanese
Performance |
| Timeline |
| Shin Etsu Chemical |
| Celanese |
Shin Etsu and Celanese Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin Etsu and Celanese
The main advantage of trading using opposite Shin Etsu and Celanese positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin Etsu position performs unexpectedly, Celanese 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 Celanese will offset losses from the drop in Celanese's long position.| Shin Etsu vs. Origin Materials | Shin Etsu vs. BASF SE NA | Shin Etsu vs. Braskem SA Class | Shin Etsu vs. Lsb Industries |
| Celanese vs. Tronox Holdings PLC | Celanese vs. Green Plains Renewable | Celanese vs. Lsb Industries | Celanese vs. Valhi Inc |
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.
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