Correlation Between Sumitomo Rubber and ADHI KARYA

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

Diversification Opportunities for Sumitomo Rubber and ADHI KARYA

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Sumitomo and ADHI is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and ADHI KARYA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADHI KARYA 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 ADHI KARYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADHI KARYA has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and ADHI KARYA go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and ADHI KARYA

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 0.37 times more return on investment than ADHI KARYA. However, Sumitomo Rubber Industries is 2.7 times less risky than ADHI KARYA. It trades about 0.21 of its potential returns per unit of risk. ADHI KARYA is currently generating about -0.05 per unit of risk. If you would invest  890.00  in Sumitomo Rubber Industries on October 24, 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 Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sumitomo Rubber Industries  vs.  ADHI KARYA

 Performance 
       Timeline  
Sumitomo Rubber Indu 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sumitomo Rubber reported solid returns over the last few months and may actually be approaching a breakup point.
ADHI KARYA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ADHI KARYA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sumitomo Rubber and ADHI KARYA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sumitomo Rubber and ADHI KARYA

The main advantage of trading using opposite Sumitomo Rubber and ADHI KARYA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber position performs unexpectedly, ADHI KARYA 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 ADHI KARYA will offset losses from the drop in ADHI KARYA's long position.
The idea behind Sumitomo Rubber Industries and ADHI KARYA 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 Stocks Directory module to find actively traded stocks across global markets.

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