Correlation Between Bread Financial and Sumitomo Mitsui

Can any of the company-specific risk be diversified away by investing in both Bread Financial and Sumitomo Mitsui 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 Bread Financial and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bread Financial Holdings and Sumitomo Mitsui Financial, you can compare the effects of market volatilities on Bread Financial and Sumitomo Mitsui 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 Bread Financial with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bread Financial and Sumitomo Mitsui.

Diversification Opportunities for Bread Financial and Sumitomo Mitsui

0.42

Correlation Coefficient

Bread Financial  Sumitomo Mitsui

Very weak diversification

The 3 months correlation between Bread and Sumitomo is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bread Financial Holdings and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial and Bread Financial 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 Bread Financial Holdings are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Bread Financial i.e., Bread Financial and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Bread Financial and Sumitomo Mitsui

Assuming the 90 days trading horizon Bread Financial Holdings is expected to under-perform the Sumitomo Mitsui. In addition to that, Bread Financial is 1.35 times more volatile than Sumitomo Mitsui Financial. It trades about -0.03 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.05 per unit of volatility. If you would invest  8,412  in Sumitomo Mitsui Financial on November 28, 2024 and sell it today you would earn a total of  426.00  from holding Sumitomo Mitsui Financial or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.33%
Values	Daily Returns

Bread Financial Holdings  vs.  Sumitomo Mitsui Financial

Bread Financial Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bread Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Bread Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Bread Financial and Sumitomo Mitsui

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

The idea behind Bread Financial Holdings and Sumitomo Mitsui Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.