Correlation Between Sumitomo Mitsui and AUST AGRICULTURAL

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

Diversification Opportunities for Sumitomo Mitsui and AUST AGRICULTURAL

0.53

Correlation Coefficient

Sumitomo Mitsui  AUST AGRICULTURAL

Very weak diversification

The 3 months correlation between Sumitomo and AUST is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and AUST AGRICULTURAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUST AGRICULTURAL 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 AUST AGRICULTURAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUST AGRICULTURAL has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and AUST AGRICULTURAL go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and AUST AGRICULTURAL

Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to generate 1.47 times more return on investment than AUST AGRICULTURAL. However, Sumitomo Mitsui is 1.47 times more volatile than AUST AGRICULTURAL. It trades about 0.07 of its potential returns per unit of risk. AUST AGRICULTURAL is currently generating about 0.03 per unit of risk. If you would invest  236.00  in Sumitomo Mitsui Construction on December 30, 2024 and sell it today you would earn a total of  18.00  from holding Sumitomo Mitsui Construction or generate 7.63% return on investment over 90 days.

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

Sumitomo Mitsui Construction  vs.  AUST AGRICULTURAL

Sumitomo Mitsui Cons

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AUST AGRICULTURAL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AUST AGRICULTURAL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AUST AGRICULTURAL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sumitomo Mitsui and AUST AGRICULTURAL

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

The idea behind Sumitomo Mitsui Construction and AUST AGRICULTURAL 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.