Correlation Between Coca Cola and Sumitomo Mitsui

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

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

Diversification Opportunities for Coca Cola and Sumitomo Mitsui

0.31

Correlation Coefficient

Coca Cola  Sumitomo Mitsui

Weak diversification

The 3 months correlation between Coca and Sumitomo is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons and Coca Cola 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 The Coca Cola 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 Cons has no effect on the direction of Coca Cola i.e., Coca Cola and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Coca Cola and Sumitomo Mitsui

Assuming the 90 days trading horizon The Coca Cola is expected to generate 0.67 times more return on investment than Sumitomo Mitsui. However, The Coca Cola is 1.49 times less risky than Sumitomo Mitsui. It trades about -0.07 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about -0.13 per unit of risk. If you would invest  6,085  in The Coca Cola on October 4, 2024 and sell it today you would lose (103.00) from holding The Coca Cola or give up 1.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Coca Cola  vs.  Sumitomo Mitsui Construction

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sumitomo Mitsui Cons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Mitsui Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Coca Cola and Sumitomo Mitsui

The main advantage of trading using opposite Coca Cola and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 The Coca Cola and Sumitomo Mitsui Construction 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.