Correlation Between Shin Etsu and Paychex

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

Diversification Opportunities for Shin Etsu and Paychex

0.4

Correlation Coefficient

Shin Etsu  Paychex

Very weak diversification

The 3 months correlation between Shin and Paychex is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Shin Etsu Chemical Co and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex and Shin Etsu 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 Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Shin Etsu i.e., Shin Etsu and Paychex go up and down completely randomly.

Pair Corralation between Shin Etsu and Paychex

Assuming the 90 days horizon Shin Etsu Chemical Co is expected to generate 1.35 times more return on investment than Paychex. However, Shin Etsu is 1.35 times more volatile than Paychex. It trades about 0.08 of its potential returns per unit of risk. Paychex is currently generating about -0.02 per unit of risk. If you would invest  2,426  in Shin Etsu Chemical Co on April 23, 2025 and sell it today you would earn a total of  264.00  from holding Shin Etsu Chemical Co or generate 10.88% return on investment over 90 days.

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

Shin Etsu Chemical Co  vs.  Paychex

Shin Etsu Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shin Etsu Chemical Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Shin Etsu may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Paychex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paychex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Paychex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Shin Etsu and Paychex

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

The idea behind Shin Etsu Chemical Co and Paychex 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.