Correlation Between Sumitomo Rubber and Thai Beverage

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

Diversification Opportunities for Sumitomo Rubber and Thai Beverage

0.36

Correlation Coefficient

Sumitomo Rubber  Thai Beverage

Weak diversification

The 3 months correlation between Sumitomo and Thai is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Thai Beverage Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage Public 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 Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage Public has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Thai Beverage go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and Thai Beverage

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 1.08 times more return on investment than Thai Beverage. However, Sumitomo Rubber is 1.08 times more volatile than Thai Beverage Public. It trades about 0.05 of its potential returns per unit of risk. Thai Beverage Public is currently generating about 0.05 per unit of risk. If you would invest  355.00  in Sumitomo Rubber Industries on September 14, 2024 and sell it today you would earn a total of  695.00  from holding Sumitomo Rubber Industries or generate 195.77% return on investment over 90 days.

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

Sumitomo Rubber Industries  vs.  Thai Beverage Public

Sumitomo Rubber Indu

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 8 (%) 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.

Thai Beverage Public

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Thai Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sumitomo Rubber and Thai Beverage

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

The idea behind Sumitomo Rubber Industries and Thai Beverage Public 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.