Correlation Between Sumitomo Rubber and Hafnia

Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Hafnia 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 Hafnia 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 Hafnia Limited, you can compare the effects of market volatilities on Sumitomo Rubber and Hafnia 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 Hafnia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Hafnia.

Diversification Opportunities for Sumitomo Rubber and Hafnia

-0.56

Correlation Coefficient

Sumitomo Rubber  Hafnia

Excellent diversification

The 3 months correlation between Sumitomo and Hafnia is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Hafnia go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and Hafnia

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 2.01 times more return on investment than Hafnia. However, Sumitomo Rubber is 2.01 times more volatile than Hafnia Limited. It trades about 0.22 of its potential returns per unit of risk. Hafnia Limited is currently generating about -0.68 per unit of risk. If you would invest  1,020  in Sumitomo Rubber Industries on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Sumitomo Rubber Industries or generate 4.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.53%
Values	Daily Returns

Sumitomo Rubber Industries  vs.  Hafnia Limited

Sumitomo Rubber Indu

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sumitomo Rubber Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Sumitomo Rubber reported solid returns over the last few months and may actually be approaching a breakup point.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sumitomo Rubber and Hafnia

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

The idea behind Sumitomo Rubber Industries and Hafnia Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.