Correlation Between Sumitomo Mitsui and AMBRA SA

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

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

Diversification Opportunities for Sumitomo Mitsui and AMBRA SA

-0.36

Correlation Coefficient

Sumitomo Mitsui  AMBRA SA

Very good diversification

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

Pair Corralation between Sumitomo Mitsui and AMBRA SA

Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to under-perform the AMBRA SA. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Mitsui Construction is 1.75 times less risky than AMBRA SA. The stock trades about -0.03 of its potential returns per unit of risk. The AMBRA SA A is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  471.00  in AMBRA SA A on October 4, 2024 and sell it today you would earn a total of  29.00  from holding AMBRA SA A or generate 6.16% return on investment over 90 days.

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

Sumitomo Mitsui Construction  vs.  AMBRA SA A

Sumitomo Mitsui Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Mitsui Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AMBRA SA A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMBRA SA A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AMBRA SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sumitomo Mitsui and AMBRA SA

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

The idea behind Sumitomo Mitsui Construction and AMBRA SA A 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.