Correlation Between Sumitomo Chemical and Shin Etsu
Can any of the company-specific risk be diversified away by investing in both Sumitomo Chemical and Shin Etsu 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 Sumitomo Chemical and Shin Etsu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Chemical Co and Shin Etsu Chemical Co, you can compare the effects of market volatilities on Sumitomo Chemical and Shin Etsu 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 Sumitomo Chemical with a short position of Shin Etsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Chemical and Shin Etsu.
Diversification Opportunities for Sumitomo Chemical and Shin Etsu
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Shin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and Shin Etsu Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shin Etsu Chemical and Sumitomo 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 Sumitomo Chemical Co are associated (or correlated) with Shin Etsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shin Etsu Chemical has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Shin Etsu go up and down completely randomly.
Pair Corralation between Sumitomo Chemical and Shin Etsu
Assuming the 90 days horizon Sumitomo Chemical Co is expected to under-perform the Shin Etsu. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Chemical Co is 2.81 times less risky than Shin Etsu. The pink sheet trades about -0.29 of its potential returns per unit of risk. The Shin Etsu Chemical Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 4,057 in Shin Etsu Chemical Co on August 27, 2024 and sell it today you would lose (245.00) from holding Shin Etsu Chemical Co or give up 6.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Chemical Co vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| Sumitomo Chemical |
| Shin Etsu Chemical |
Sumitomo Chemical and Shin Etsu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Chemical and Shin Etsu
The main advantage of trading using opposite Sumitomo Chemical and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Chemical position performs unexpectedly, Shin Etsu 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 Shin Etsu will offset losses from the drop in Shin Etsu's long position.| Sumitomo Chemical vs. Origin Materials | Sumitomo Chemical vs. BASF SE NA | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Lsb Industries |
| Shin Etsu vs. Kuraray Co | Shin Etsu vs. Mitsubishi Chemical Holdings | Shin Etsu vs. Sumitomo Chemical Co | Shin Etsu 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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