Correlation Between Sumitomo Rubber and Vivendi SE

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

Diversification Opportunities for Sumitomo Rubber and Vivendi SE

0.45

Correlation Coefficient

Sumitomo Rubber  Vivendi SE

Very weak diversification

The 3 months correlation between Sumitomo and Vivendi is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Vivendi SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vivendi SE 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 Vivendi SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vivendi SE has no effect on the direction of Sumitomo Rubber i.e., Sumitomo Rubber and Vivendi SE go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and Vivendi SE

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to generate 0.68 times more return on investment than Vivendi SE. However, Sumitomo Rubber Industries is 1.46 times less risky than Vivendi SE. It trades about 0.15 of its potential returns per unit of risk. Vivendi SE is currently generating about 0.09 per unit of risk. If you would invest  1,060  in Sumitomo Rubber Industries on December 27, 2024 and sell it today you would earn a total of  150.00  from holding Sumitomo Rubber Industries or generate 14.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Sumitomo Rubber Industries  vs.  Vivendi SE

Sumitomo Rubber Indu

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 11 (%) 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.

Vivendi SE

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vivendi SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Vivendi SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Rubber and Vivendi SE

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

The idea behind Sumitomo Rubber Industries and Vivendi SE 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.