Correlation Between Sumitomo Mitsui and VIVA WINE

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

Diversification Opportunities for Sumitomo Mitsui and VIVA WINE

0.34

Correlation Coefficient

Sumitomo Mitsui  VIVA WINE

Weak diversification

The 3 months correlation between Sumitomo and VIVA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and VIVA WINE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIVA WINE GROUP 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 VIVA WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIVA WINE GROUP has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and VIVA WINE go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and VIVA WINE

Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 1.95 times less return on investment than VIVA WINE. In addition to that, Sumitomo Mitsui is 1.15 times more volatile than VIVA WINE GROUP. It trades about 0.07 of its total potential returns per unit of risk. VIVA WINE GROUP is currently generating about 0.15 per unit of volatility. If you would invest  322.00  in VIVA WINE GROUP on December 28, 2024 and sell it today you would earn a total of  52.00  from holding VIVA WINE GROUP or generate 16.15% 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.  VIVA WINE GROUP

Sumitomo Mitsui Cons

Risk-Adjusted Performance

Insignificant

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 unsteady basic indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in April 2025.

VIVA WINE GROUP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VIVA WINE GROUP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, VIVA WINE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Mitsui and VIVA WINE

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

The idea behind Sumitomo Mitsui Construction and VIVA WINE GROUP 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.