Correlation Between Valhi and Shin-Etsu Chemical
Can any of the company-specific risk be diversified away by investing in both Valhi and Shin-Etsu Chemical 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 Valhi and Shin-Etsu Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valhi Inc and Shin Etsu Chemical Co, you can compare the effects of market volatilities on Valhi and Shin-Etsu Chemical 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 Valhi with a short position of Shin-Etsu Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valhi and Shin-Etsu Chemical.
Diversification Opportunities for Valhi and Shin-Etsu Chemical
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valhi and Shin-Etsu is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Valhi Inc 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 Valhi 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 Valhi Inc are associated (or correlated) with Shin-Etsu Chemical. 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 Valhi i.e., Valhi and Shin-Etsu Chemical go up and down completely randomly.
Pair Corralation between Valhi and Shin-Etsu Chemical
Considering the 90-day investment horizon Valhi Inc is expected to generate 1.69 times more return on investment than Shin-Etsu Chemical. However, Valhi is 1.69 times more volatile than Shin Etsu Chemical Co. It trades about -0.09 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.16 per unit of risk. If you would invest 2,219 in Valhi Inc on November 3, 2024 and sell it today you would lose (132.00) from holding Valhi Inc or give up 5.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valhi Inc vs. Shin Etsu Chemical Co
Performance |
| Timeline |
| Valhi Inc |
| Shin Etsu Chemical |
Valhi and Shin-Etsu Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valhi and Shin-Etsu Chemical
The main advantage of trading using opposite Valhi and Shin-Etsu Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valhi position performs unexpectedly, Shin-Etsu Chemical 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 Chemical will offset losses from the drop in Shin-Etsu Chemical's long position.| Valhi vs. Huntsman | Valhi vs. Lsb Industries | Valhi vs. Westlake Chemical Partners | Valhi vs. Green Plains Renewable |
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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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