Correlation Between Shin-Etsu Chemical and Black Swan

Can any of the company-specific risk be diversified away by investing in both Shin-Etsu Chemical and Black Swan 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 Black Swan 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 Black Swan Graphene, you can compare the effects of market volatilities on Shin-Etsu Chemical and Black Swan 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 Black Swan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shin-Etsu Chemical and Black Swan.

Diversification Opportunities for Shin-Etsu Chemical and Black Swan

0.37

Correlation Coefficient

Shin-Etsu Chemical  Black Swan

Weak diversification

The 3 months correlation between Shin-Etsu and Black is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Black Swan Graphene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Swan Graphene 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 Black Swan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Swan Graphene has no effect on the direction of Shin-Etsu Chemical i.e., Shin-Etsu Chemical and Black Swan go up and down completely randomly.

Pair Corralation between Shin-Etsu Chemical and Black Swan

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 0.77 times more return on investment than Black Swan. However, Shin Etsu Chemical Co is 1.3 times less risky than Black Swan. It trades about -0.03 of its potential returns per unit of risk. Black Swan Graphene is currently generating about -0.07 per unit of risk. If you would invest  4,109  in Shin Etsu Chemical Co on September 3, 2024 and sell it today you would lose (545.00) from holding Shin Etsu Chemical Co or give up 13.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Shin Etsu Chemical Co  vs.  Black Swan Graphene

Shin Etsu Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shin Etsu Chemical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Black Swan Graphene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Swan Graphene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Shin-Etsu Chemical and Black Swan

The main advantage of trading using opposite Shin-Etsu Chemical and Black Swan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shin-Etsu Chemical position performs unexpectedly, Black Swan 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 Black Swan will offset losses from the drop in Black Swan's long position.

The idea behind Shin Etsu Chemical Co and Black Swan Graphene 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.