Correlation Between CHAMPION IRON and Shin Etsu

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Can any of the company-specific risk be diversified away by investing in both CHAMPION IRON 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 CHAMPION IRON and Shin Etsu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHAMPION IRON and Shin Etsu Chemical Co, you can compare the effects of market volatilities on CHAMPION IRON 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 CHAMPION IRON with a short position of Shin Etsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHAMPION IRON and Shin Etsu.

Diversification Opportunities for CHAMPION IRON and Shin Etsu

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CHAMPION and Shin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CHAMPION IRON 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 CHAMPION IRON 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 CHAMPION IRON 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 CHAMPION IRON i.e., CHAMPION IRON and Shin Etsu go up and down completely randomly.

Pair Corralation between CHAMPION IRON and Shin Etsu

Assuming the 90 days trading horizon CHAMPION IRON is expected to generate 1.05 times less return on investment than Shin Etsu. In addition to that, CHAMPION IRON is 1.06 times more volatile than Shin Etsu Chemical Co. It trades about 0.09 of its total potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about 0.1 per unit of volatility. If you would invest  2,325  in Shin Etsu Chemical Co on April 20, 2025 and sell it today you would earn a total of  339.00  from holding Shin Etsu Chemical Co or generate 14.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

CHAMPION IRON  vs.  Shin Etsu Chemical Co

 Performance 
       Timeline  
CHAMPION IRON 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in CHAMPION IRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHAMPION IRON reported solid returns over the last few months and may actually be approaching a breakup point.
Shin Etsu Chemical 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Shin Etsu Chemical Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Shin Etsu reported solid returns over the last few months and may actually be approaching a breakup point.

CHAMPION IRON and Shin Etsu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CHAMPION IRON and Shin Etsu

The main advantage of trading using opposite CHAMPION IRON and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHAMPION IRON 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 CHAMPION IRON and Shin Etsu Chemical Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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