Correlation Between Sumitomo Rubber and Materialise

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

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

Diversification Opportunities for Sumitomo Rubber and Materialise

0.65

Correlation Coefficient

Sumitomo Rubber  Materialise

Poor diversification

The 3 months correlation between Sumitomo and Materialise is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Materialise NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materialise NV and Sumitomo Rubber 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 Sumitomo Rubber Industries are associated (or correlated) with Materialise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materialise NV has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Materialise go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and Materialise

Assuming the 90 days horizon Sumitomo Rubber is expected to generate 11.27 times less return on investment than Materialise. But when comparing it to its historical volatility, Sumitomo Rubber Industries is 2.21 times less risky than Materialise. It trades about 0.04 of its potential returns per unit of risk. Materialise NV is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Materialise NV on November 21, 2024 and sell it today you would earn a total of  180.00  from holding Materialise NV or generate 26.09% return on investment over 90 days.

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

Sumitomo Rubber Industries  vs.  Materialise NV

Sumitomo Rubber Indu

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Rubber is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Materialise NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Rubber and Materialise

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

The idea behind Sumitomo Rubber Industries and Materialise NV 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.