Correlation Between Sumitomo Mitsui and H M

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

Diversification Opportunities for Sumitomo Mitsui and H M

0.2

Correlation Coefficient

Sumitomo Mitsui  H M

Modest diversification

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

Pair Corralation between Sumitomo Mitsui and H M

Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 2.38 times less return on investment than H M. But when comparing it to its historical volatility, Sumitomo Mitsui Construction is 2.34 times less risky than H M. It trades about 0.12 of its potential returns per unit of risk. H M Hennes is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,075  in H M Hennes on October 7, 2024 and sell it today you would earn a total of  215.00  from holding H M Hennes or generate 20.0% 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.  H M Hennes

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.

H M Hennes

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Sumitomo Mitsui and H M

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

The idea behind Sumitomo Mitsui Construction and H M Hennes 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.