Correlation Between Kaiser Aluminum and SHIN ETSU
Can any of the company-specific risk be diversified away by investing in both Kaiser Aluminum 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 Kaiser Aluminum and SHIN ETSU into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaiser Aluminum and SHIN ETSU CHEMICAL , you can compare the effects of market volatilities on Kaiser Aluminum 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 Kaiser Aluminum with a short position of SHIN ETSU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaiser Aluminum and SHIN ETSU.
Diversification Opportunities for Kaiser Aluminum and SHIN ETSU
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Kaiser and SHIN is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL and Kaiser Aluminum 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 Kaiser Aluminum 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 Kaiser Aluminum i.e., Kaiser Aluminum and SHIN ETSU go up and down completely randomly.
Pair Corralation between Kaiser Aluminum and SHIN ETSU
Assuming the 90 days trading horizon Kaiser Aluminum is expected to generate 1.43 times more return on investment than SHIN ETSU. However, Kaiser Aluminum is 1.43 times more volatile than SHIN ETSU CHEMICAL . It trades about 0.04 of its potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about 0.04 per unit of risk. If you would invest 5,634 in Kaiser Aluminum on September 11, 2024 and sell it today you would earn a total of 1,866 from holding Kaiser Aluminum or generate 33.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Kaiser Aluminum vs. SHIN ETSU CHEMICAL
Performance |
Timeline |
Kaiser Aluminum |
SHIN ETSU CHEMICAL |
Kaiser Aluminum and SHIN ETSU Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Kaiser Aluminum and SHIN ETSU
The main advantage of trading using opposite Kaiser Aluminum and SHIN ETSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaiser Aluminum 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.The idea behind Kaiser Aluminum and SHIN ETSU CHEMICAL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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