Correlation Between PPG Industries and Shin Etsu
Can any of the company-specific risk be diversified away by investing in both PPG Industries 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 PPG Industries and Shin Etsu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PPG Industries and Shin Etsu Chemical Co, you can compare the effects of market volatilities on PPG Industries 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 PPG Industries with a short position of Shin Etsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPG Industries and Shin Etsu.
Diversification Opportunities for PPG Industries and Shin Etsu
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PPG and Shin is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PPG Industries 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 PPG Industries 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 PPG Industries 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 PPG Industries i.e., PPG Industries and Shin Etsu go up and down completely randomly.
Pair Corralation between PPG Industries and Shin Etsu
Considering the 90-day investment horizon PPG Industries is expected to generate 0.56 times more return on investment than Shin Etsu. However, PPG Industries is 1.79 times less risky than Shin Etsu. It trades about -0.29 of its potential returns per unit of risk. Shin Etsu Chemical Co is currently generating about -0.18 per unit of risk. If you would invest 14,182 in PPG Industries on January 26, 2024 and sell it today you would lose (1,130) from holding PPG Industries or give up 7.97% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
PPG Industries vs. Shin Etsu Chemical Co
Performance |
Timeline |
PPG Industries |
Shin Etsu Chemical |
PPG Industries and Shin Etsu Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PPG Industries and Shin Etsu
The main advantage of trading using opposite PPG Industries and Shin Etsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPG Industries 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 PPG Industries 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.Shin Etsu vs. Braskem SA Class | Shin Etsu vs. Lsb Industries | Shin Etsu vs. Dow Inc | Shin Etsu vs. Huntsman |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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