Correlation Between Huntsman Exploration and Sumitomo Metal

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

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

Diversification Opportunities for Huntsman Exploration and Sumitomo Metal

-0.34

Correlation Coefficient

Huntsman Exploration  Sumitomo Metal

Very good diversification

The 3 months correlation between Huntsman and Sumitomo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Huntsman Exploration 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 Huntsman Exploration 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 Huntsman Exploration 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 Huntsman Exploration i.e., Huntsman Exploration and Sumitomo Metal go up and down completely randomly.

Pair Corralation between Huntsman Exploration and Sumitomo Metal

Assuming the 90 days horizon Huntsman Exploration is expected to generate 7.92 times more return on investment than Sumitomo Metal. However, Huntsman Exploration is 7.92 times more volatile than Sumitomo Metal Mining. It trades about 0.1 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about 0.02 per unit of risk. If you would invest  2.60  in Huntsman Exploration on December 30, 2024 and sell it today you would earn a total of  1.20  from holding Huntsman Exploration or generate 46.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Huntsman Exploration  vs.  Sumitomo Metal Mining

Huntsman Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Huntsman Exploration are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Huntsman Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Metal Mining

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Metal Mining are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sumitomo Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huntsman Exploration and Sumitomo Metal

The main advantage of trading using opposite Huntsman Exploration and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huntsman Exploration 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 Huntsman Exploration 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.