Correlation Between Shiseido Company and Kao Corp
Can any of the company-specific risk be diversified away by investing in both Shiseido Company and Kao Corp 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 Shiseido Company and Kao Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shiseido Company Limited and Kao Corp ADR, you can compare the effects of market volatilities on Shiseido Company and Kao Corp 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 Shiseido Company with a short position of Kao Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiseido Company and Kao Corp.
Diversification Opportunities for Shiseido Company and Kao Corp
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Shiseido and Kao is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Shiseido Company Limited and Kao Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Corp ADR and Shiseido Company 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 Shiseido Company Limited are associated (or correlated) with Kao Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Corp ADR has no effect on the direction of Shiseido Company i.e., Shiseido Company and Kao Corp go up and down completely randomly.
Pair Corralation between Shiseido Company and Kao Corp
Assuming the 90 days horizon Shiseido Company Limited is expected to under-perform the Kao Corp. In addition to that, Shiseido Company is 1.51 times more volatile than Kao Corp ADR. It trades about -0.05 of its total potential returns per unit of risk. Kao Corp ADR is currently generating about 0.02 per unit of volatility. If you would invest 774.00 in Kao Corp ADR on September 3, 2024 and sell it today you would earn a total of 92.00 from holding Kao Corp ADR or generate 11.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 61.01% |
| Values | Daily Returns |
Shiseido Company Limited vs. Kao Corp ADR
Performance |
| Timeline |
| Shiseido Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Kao Corp ADR |
Shiseido Company and Kao Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shiseido Company and Kao Corp
The main advantage of trading using opposite Shiseido Company and Kao Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shiseido Company position performs unexpectedly, Kao Corp 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 Kao Corp will offset losses from the drop in Kao Corp's long position.| Shiseido Company vs. Kao Corp ADR | Shiseido Company vs. Unilever PLC ADR | Shiseido Company vs. Hims Hers Health | Shiseido Company vs. Procter Gamble |
| Kao Corp vs. Unilever PLC ADR | Kao Corp vs. Hims Hers Health | Kao Corp vs. Procter Gamble | Kao Corp vs. Kenvue 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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