Correlation Between AMETEK, and Sumitomo Mitsui

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

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

Diversification Opportunities for AMETEK, and Sumitomo Mitsui

0.36

Correlation Coefficient

AMETEK,  Sumitomo Mitsui

Weak diversification

The 3 months correlation between AMETEK, and Sumitomo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding AMETEK, 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 AMETEK, 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 AMETEK, 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 AMETEK, i.e., AMETEK, and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between AMETEK, and Sumitomo Mitsui

Assuming the 90 days trading horizon AMETEK, is expected to under-perform the Sumitomo Mitsui. But the stock apears to be less risky and, when comparing its historical volatility, AMETEK, is 1.77 times less risky than Sumitomo Mitsui. The stock trades about -0.13 of its potential returns per unit of risk. The Sumitomo Mitsui Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,856  in Sumitomo Mitsui Financial on December 25, 2024 and sell it today you would earn a total of  252.00  from holding Sumitomo Mitsui Financial or generate 2.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AMETEK,  vs.  Sumitomo Mitsui Financial

AMETEK,

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMETEK, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AMETEK, and Sumitomo Mitsui

The main advantage of trading using opposite AMETEK, and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMETEK, 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 AMETEK, 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.