Correlation Between Sumitomo Rubber and RYANAIR HLDGS

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

Diversification Opportunities for Sumitomo Rubber and RYANAIR HLDGS

0.47

Correlation Coefficient

Sumitomo Rubber  RYANAIR HLDGS

Very weak diversification

The 3 months correlation between Sumitomo and RYANAIR is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and RYANAIR HLDGS ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RYANAIR HLDGS ADR 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 RYANAIR HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RYANAIR HLDGS ADR has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and RYANAIR HLDGS go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and RYANAIR HLDGS

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 0.83 times more return on investment than RYANAIR HLDGS. However, Sumitomo Rubber Industries is 1.2 times less risky than RYANAIR HLDGS. It trades about 0.05 of its potential returns per unit of risk. RYANAIR HLDGS ADR is currently generating about 0.03 per unit of risk. If you would invest  346.00  in Sumitomo Rubber Industries on October 10, 2024 and sell it today you would earn a total of  704.00  from holding Sumitomo Rubber Industries or generate 203.47% return on investment over 90 days.

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

Sumitomo Rubber Industries  vs.  RYANAIR HLDGS ADR

Sumitomo Rubber Indu

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 13 (%) 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.

RYANAIR HLDGS ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RYANAIR HLDGS ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RYANAIR HLDGS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sumitomo Rubber and RYANAIR HLDGS

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

The idea behind Sumitomo Rubber Industries and RYANAIR HLDGS ADR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.