Correlation Between Alaska Power and Sumitomo Corp
Can any of the company-specific risk be diversified away by investing in both Alaska Power and Sumitomo Corp 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 Alaska Power and Sumitomo Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Power Telephone and Sumitomo Corp ADR, you can compare the effects of market volatilities on Alaska Power and Sumitomo Corp 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 Alaska Power with a short position of Sumitomo Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Power and Sumitomo Corp.
Diversification Opportunities for Alaska Power and Sumitomo Corp
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alaska and Sumitomo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Power Telephone and Sumitomo Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Corp ADR and Alaska Power 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 Alaska Power Telephone are associated (or correlated) with Sumitomo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Corp ADR has no effect on the direction of Alaska Power i.e., Alaska Power and Sumitomo Corp go up and down completely randomly.
Pair Corralation between Alaska Power and Sumitomo Corp
Given the investment horizon of 90 days Alaska Power is expected to generate 2.18 times less return on investment than Sumitomo Corp. But when comparing it to its historical volatility, Alaska Power Telephone is 1.29 times less risky than Sumitomo Corp. It trades about 0.06 of its potential returns per unit of risk. Sumitomo Corp ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,164 in Sumitomo Corp ADR on December 2, 2024 and sell it today you would earn a total of 90.00 from holding Sumitomo Corp ADR or generate 4.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alaska Power Telephone vs. Sumitomo Corp ADR
Performance |
Timeline |
Alaska Power Telephone |
Sumitomo Corp ADR |
Alaska Power and Sumitomo Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alaska Power and Sumitomo Corp
The main advantage of trading using opposite Alaska Power and Sumitomo Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Power position performs unexpectedly, Sumitomo Corp 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 Corp will offset losses from the drop in Sumitomo Corp's long position.Alaska Power vs. Alliance Recovery | Alaska Power vs. Ayala | Alaska Power vs. Alliance Global Group | Alaska Power vs. RCABS Inc |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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