Correlation Between Asia Broadband and Sumitomo Metal

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

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

Diversification Opportunities for Asia Broadband and Sumitomo Metal

0.35

Correlation Coefficient

Asia Broadband  Sumitomo Metal

Weak diversification

The 3 months correlation between Asia and Sumitomo is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Asia Broadband and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining and Asia Broadband 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 Asia Broadband are associated (or correlated) with Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Asia Broadband i.e., Asia Broadband and Sumitomo Metal go up and down completely randomly.

Pair Corralation between Asia Broadband and Sumitomo Metal

Given the investment horizon of 90 days Asia Broadband is expected to generate 2.29 times more return on investment than Sumitomo Metal. However, Asia Broadband is 2.29 times more volatile than Sumitomo Metal Mining. It trades about 0.03 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about 0.05 per unit of risk. If you would invest  2.10  in Asia Broadband on December 26, 2024 and sell it today you would earn a total of  0.06  from holding Asia Broadband or generate 2.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Asia Broadband  vs.  Sumitomo Metal Mining

Asia Broadband

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Broadband are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Asia Broadband may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sumitomo Metal Mining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Metal Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sumitomo Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Asia Broadband and Sumitomo Metal

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

The idea behind Asia Broadband and Sumitomo Metal Mining 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..