Correlation Between Sumitomo Rubber and Virtus Investment

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

Diversification Opportunities for Sumitomo Rubber and Virtus Investment

-0.68

Correlation Coefficient

Sumitomo Rubber  Virtus Investment

Excellent diversification

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

Pair Corralation between Sumitomo Rubber and Virtus Investment

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 3.13 times more return on investment than Virtus Investment. However, Sumitomo Rubber is 3.13 times more volatile than Virtus Investment Partners. It trades about 0.05 of its potential returns per unit of risk. Virtus Investment Partners is currently generating about 0.01 per unit of risk. If you would invest  359.00  in Sumitomo Rubber Industries on November 21, 2024 and sell it today you would earn a total of  731.00  from holding Sumitomo Rubber Industries or generate 203.62% return on investment over 90 days.

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

Sumitomo Rubber Industries  vs.  Virtus Investment Partners

Sumitomo Rubber Indu

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Rubber is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Virtus Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Investment Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sumitomo Rubber and Virtus Investment

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

The idea behind Sumitomo Rubber Industries and Virtus Investment Partners 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.