Correlation Between Scale All and Sumitomo Rubber

Can any of the company-specific risk be diversified away by investing in both Scale All and Sumitomo Rubber 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 Scale All and Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Scale All Share and Sumitomo Rubber Industries, you can compare the effects of market volatilities on Scale All and Sumitomo Rubber 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 Scale All with a short position of Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scale All and Sumitomo Rubber.

Diversification Opportunities for Scale All and Sumitomo Rubber

0.0

Correlation Coefficient

Scale All  Sumitomo Rubber

Pay attention - limited upside

The 3 months correlation between Scale and Sumitomo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Scale All Share and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and Scale All 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 Scale All Share are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of Scale All i.e., Scale All and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between Scale All and Sumitomo Rubber

If you would invest  955.00  in Sumitomo Rubber Industries on October 1, 2024 and sell it today you would earn a total of  105.00  from holding Sumitomo Rubber Industries or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Scale All Share  vs.  Sumitomo Rubber Industries

Pair Trading with Scale All and Sumitomo Rubber

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

The idea behind Scale All Share and Sumitomo Rubber Industries 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.