Correlation Between Sumitomo Rubber and BANKINTER ADR

Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber and BANKINTER ADR 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 BANKINTER ADR 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 BANKINTER ADR 2007, you can compare the effects of market volatilities on Sumitomo Rubber and BANKINTER ADR 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 BANKINTER ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and BANKINTER ADR.

Diversification Opportunities for Sumitomo Rubber and BANKINTER ADR

0.68

Correlation Coefficient

Sumitomo Rubber  BANKINTER ADR

Poor diversification

The 3 months correlation between Sumitomo and BANKINTER is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and BANKINTER ADR 2007 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANKINTER ADR 2007 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 BANKINTER ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANKINTER ADR 2007 has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and BANKINTER ADR go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and BANKINTER ADR

Assuming the 90 days horizon Sumitomo Rubber is expected to generate 3.78 times less return on investment than BANKINTER ADR. In addition to that, Sumitomo Rubber is 1.24 times more volatile than BANKINTER ADR 2007. It trades about 0.01 of its total potential returns per unit of risk. BANKINTER ADR 2007 is currently generating about 0.04 per unit of volatility. If you would invest  730.00  in BANKINTER ADR 2007 on October 12, 2024 and sell it today you would earn a total of  5.00  from holding BANKINTER ADR 2007 or generate 0.68% 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.  BANKINTER ADR 2007

Sumitomo Rubber Indu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Rubber reported solid returns over the last few months and may actually be approaching a breakup point.

BANKINTER ADR 2007

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BANKINTER ADR 2007 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BANKINTER ADR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sumitomo Rubber and BANKINTER ADR

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

The idea behind Sumitomo Rubber Industries and BANKINTER ADR 2007 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.