Correlation Between Sumitomo Rubber and Traton SE
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and Traton SE 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 Traton SE 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 Traton SE, you can compare the effects of market volatilities on Sumitomo Rubber and Traton SE 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 Traton SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Traton SE.
Diversification Opportunities for Sumitomo Rubber and Traton SE
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sumitomo and Traton is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE 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 Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Traton SE go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Traton SE
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 0.68 times more return on investment than Traton SE. However, Sumitomo Rubber Industries is 1.48 times less risky than Traton SE. It trades about 0.21 of its potential returns per unit of risk. Traton SE is currently generating about -0.06 per unit of risk. If you would invest 890.00 in Sumitomo Rubber Industries on October 25, 2024 and sell it today you would earn a total of 190.00 from holding Sumitomo Rubber Industries or generate 21.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Sumitomo Rubber Industries vs. Traton SE
Performance |
Timeline |
Sumitomo Rubber Indu |
Traton SE |
Sumitomo Rubber and Traton SE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sumitomo Rubber and Traton SE
The main advantage of trading using opposite Sumitomo Rubber and Traton SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, Traton SE 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 Traton SE will offset losses from the drop in Traton SE's long position.Sumitomo Rubber vs. Carsales | Sumitomo Rubber vs. CarsalesCom | Sumitomo Rubber vs. SCOTT TECHNOLOGY | Sumitomo Rubber vs. PKSHA TECHNOLOGY INC |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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