Correlation Between BIONTECH and Sumitomo Mitsui

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

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

Diversification Opportunities for BIONTECH and Sumitomo Mitsui

0.5

Correlation Coefficient

BIONTECH  Sumitomo Mitsui

Very weak diversification

The 3 months correlation between BIONTECH and Sumitomo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BIONTECH SE DRN 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 BIONTECH 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 BIONTECH SE DRN 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 BIONTECH i.e., BIONTECH and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between BIONTECH and Sumitomo Mitsui

Assuming the 90 days trading horizon BIONTECH is expected to generate 1.1 times less return on investment than Sumitomo Mitsui. In addition to that, BIONTECH is 1.64 times more volatile than Sumitomo Mitsui Financial. It trades about 0.11 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.2 per unit of volatility. If you would invest  7,154  in Sumitomo Mitsui Financial on September 12, 2024 and sell it today you would earn a total of  1,882  from holding Sumitomo Mitsui Financial or generate 26.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

BIONTECH SE DRN  vs.  Sumitomo Mitsui Financial

BIONTECH SE DRN

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BIONTECH SE DRN are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BIONTECH sustained solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Sumitomo Mitsui sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BIONTECH and Sumitomo Mitsui

The main advantage of trading using opposite BIONTECH and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BIONTECH 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 BIONTECH SE DRN 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.