Correlation Between Sumitomo Mitsui and CARGOJET INC

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

Diversification Opportunities for Sumitomo Mitsui and CARGOJET INC

-0.51

Correlation Coefficient

Sumitomo Mitsui  CARGOJET INC

Excellent diversification

The 3 months correlation between Sumitomo and CARGOJET is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and CARGOJET INC VAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARGOJET INC VAR 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 CARGOJET INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARGOJET INC VAR has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and CARGOJET INC go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and CARGOJET INC

Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to under-perform the CARGOJET INC. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Mitsui Construction is 1.13 times less risky than CARGOJET INC. The stock trades about -0.09 of its potential returns per unit of risk. The CARGOJET INC VAR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  7,411  in CARGOJET INC VAR on October 13, 2024 and sell it today you would earn a total of  239.00  from holding CARGOJET INC VAR or generate 3.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Sumitomo Mitsui Construction  vs.  CARGOJET INC VAR

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.

CARGOJET INC VAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARGOJET INC VAR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sumitomo Mitsui and CARGOJET INC

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

The idea behind Sumitomo Mitsui Construction and CARGOJET INC VAR 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..