Correlation Between Sumitomo Mitsui and AGF Management

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

Diversification Opportunities for Sumitomo Mitsui and AGF Management

-0.2

Correlation Coefficient

Sumitomo Mitsui  AGF Management

Good diversification

The 3 months correlation between Sumitomo and AGF is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and AGF Management go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and AGF Management

Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 11.15 times less return on investment than AGF Management. But when comparing it to its historical volatility, Sumitomo Mitsui Construction is 1.12 times less risky than AGF Management. It trades about 0.01 of its potential returns per unit of risk. AGF Management Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  495.00  in AGF Management Limited on October 7, 2024 and sell it today you would earn a total of  215.00  from holding AGF Management Limited or generate 43.43% 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.  AGF Management Limited

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.

AGF Management

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Sumitomo Mitsui and AGF Management

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

The idea behind Sumitomo Mitsui Construction and AGF Management Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.