Correlation Between Shin-Etsu Chemical and Dow
Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical and Dow 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 Dow 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 Dow Inc, you can compare the effects of market volatilities on Shin-Etsu Chemical and Dow 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 Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and Dow.
Diversification Opportunities for Shin-Etsu Chemical and Dow
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Shin-Etsu and Dow is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Dow go up and down completely randomly.
Pair Corralation between Shin-Etsu Chemical and Dow
Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 1.48 times more return on investment than Dow. However, Shin-Etsu Chemical is 1.48 times more volatile than Dow Inc. It trades about 0.04 of its potential returns per unit of risk. Dow Inc is currently generating about -0.01 per unit of risk. If you would invest 1,480 in Shin Etsu Chemical Co on August 31, 2024 and sell it today you would earn a total of 334.00 from holding Shin Etsu Chemical Co or generate 22.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shin Etsu Chemical Co vs. Dow Inc
Performance |
| Timeline |
| Shin Etsu Chemical |
| Dow Inc |
Shin-Etsu Chemical and Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shin-Etsu Chemical and Dow
The main advantage of trading using opposite Shin-Etsu Chemical and Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin-Etsu Chemical position performs unexpectedly, Dow 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 Dow will offset losses from the drop in Dow's long position.| Shin-Etsu Chemical vs. BASF SE NA | Shin-Etsu Chemical vs. BASF SE ADR | Shin-Etsu Chemical vs. Braskem SA Class | Shin-Etsu Chemical vs. Celanese |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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