Correlation Between NEW MILLENNIUM and Sumitomo

Can any of the company-specific risk be diversified away by investing in both NEW MILLENNIUM and Sumitomo 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 NEW MILLENNIUM and Sumitomo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NEW MILLENNIUM IRON and Sumitomo, you can compare the effects of market volatilities on NEW MILLENNIUM and Sumitomo 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 NEW MILLENNIUM with a short position of Sumitomo. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEW MILLENNIUM and Sumitomo.

Diversification Opportunities for NEW MILLENNIUM and Sumitomo

0.01

Correlation Coefficient

NEW MILLENNIUM  Sumitomo

Significant diversification

The 3 months correlation between NEW and Sumitomo is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and Sumitomo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo and NEW MILLENNIUM 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 NEW MILLENNIUM IRON are associated (or correlated) with Sumitomo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo has no effect on the direction of NEW MILLENNIUM i.e., NEW MILLENNIUM and Sumitomo go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and Sumitomo

Assuming the 90 days trading horizon NEW MILLENNIUM IRON is expected to under-perform the Sumitomo. But the stock apears to be less risky and, when comparing its historical volatility, NEW MILLENNIUM IRON is 1.03 times less risky than Sumitomo. The stock trades about -0.02 of its potential returns per unit of risk. The Sumitomo is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,017  in Sumitomo on October 8, 2024 and sell it today you would earn a total of  122.00  from holding Sumitomo or generate 6.05% return on investment over 90 days.

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

NEW MILLENNIUM IRON  vs.  Sumitomo

NEW MILLENNIUM IRON

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NEW MILLENNIUM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sumitomo

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with NEW MILLENNIUM and Sumitomo

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

The idea behind NEW MILLENNIUM IRON and Sumitomo 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 Transaction History module to view history of all your transactions and understand their impact on performance.