Correlation Between Sumitomo Mitsui and Apple

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

Diversification Opportunities for Sumitomo Mitsui and Apple

0.37

Correlation Coefficient

Sumitomo Mitsui  Apple

Weak diversification

The 3 months correlation between Sumitomo and Apple is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Apple go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Apple

Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 2.27 times more return on investment than Apple. However, Sumitomo Mitsui is 2.27 times more volatile than Apple Inc. It trades about 0.26 of its potential returns per unit of risk. Apple Inc is currently generating about 0.54 per unit of risk. If you would invest  224.00  in Sumitomo Mitsui Construction on September 22, 2024 and sell it today you would earn a total of  26.00  from holding Sumitomo Mitsui Construction or generate 11.61% return on investment over 90 days.

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

Sumitomo Mitsui Construction  vs.  Apple Inc

Sumitomo Mitsui Cons

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Apple Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Mitsui and Apple

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

The idea behind Sumitomo Mitsui Construction and Apple Inc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.