Correlation Between Cable One and Sumitomo Mitsui

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

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

Diversification Opportunities for Cable One and Sumitomo Mitsui

0.92

Correlation Coefficient

Cable One  Sumitomo Mitsui

Almost no diversification

The 3 months correlation between Cable and Sumitomo is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Cable One 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 Cable One 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 Cable One 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 Cable One i.e., Cable One and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Cable One and Sumitomo Mitsui

Assuming the 90 days trading horizon Cable One is expected to under-perform the Sumitomo Mitsui. But the stock apears to be less risky and, when comparing its historical volatility, Cable One is 1.25 times less risky than Sumitomo Mitsui. The stock trades about -0.02 of its potential returns per unit of risk. The Sumitomo Mitsui Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  7,992  in Sumitomo Mitsui Financial on September 19, 2024 and sell it today you would earn a total of  1,035  from holding Sumitomo Mitsui Financial or generate 12.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Cable One  vs.  Sumitomo Mitsui Financial

Cable One

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 18 (%) 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 Cable One and Sumitomo Mitsui

The main advantage of trading using opposite Cable One and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cable One 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 Cable One 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.