Correlation Between Sumitomo Mitsui and GREENLIGHT CAP

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

Diversification Opportunities for Sumitomo Mitsui and GREENLIGHT CAP

-0.01

Correlation Coefficient

Sumitomo Mitsui  GREENLIGHT CAP

Good diversification

The 3 months correlation between Sumitomo and GREENLIGHT is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and GREENLIGHT CAP RE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GREENLIGHT CAP RE 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 GREENLIGHT CAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GREENLIGHT CAP RE has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and GREENLIGHT CAP go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and GREENLIGHT CAP

Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 10.05 times less return on investment than GREENLIGHT CAP. In addition to that, Sumitomo Mitsui is 1.01 times more volatile than GREENLIGHT CAP RE. It trades about 0.01 of its total potential returns per unit of risk. GREENLIGHT CAP RE is currently generating about 0.07 per unit of volatility. If you would invest  1,010  in GREENLIGHT CAP RE on October 9, 2024 and sell it today you would earn a total of  290.00  from holding GREENLIGHT CAP RE or generate 28.71% 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.  GREENLIGHT CAP RE

Sumitomo Mitsui Cons

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 2 (%) 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.

GREENLIGHT CAP RE

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GREENLIGHT CAP RE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, GREENLIGHT CAP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sumitomo Mitsui and GREENLIGHT CAP

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

The idea behind Sumitomo Mitsui Construction and GREENLIGHT CAP RE 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.