Correlation Between Companhia and Sumitomo Mitsui

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

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

Diversification Opportunities for Companhia and Sumitomo Mitsui

0.07

Correlation Coefficient

Companhia  Sumitomo Mitsui

Significant diversification

The 3 months correlation between Companhia and Sumitomo is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Fiacao 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 Companhia 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 Companhia de Fiacao 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 Companhia i.e., Companhia and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Companhia and Sumitomo Mitsui

Assuming the 90 days trading horizon Companhia de Fiacao is expected to under-perform the Sumitomo Mitsui. In addition to that, Companhia is 1.44 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 0.04 per unit of volatility. If you would invest  8,856  in Sumitomo Mitsui Financial on December 26, 2024 and sell it today you would earn a total of  252.00  from holding Sumitomo Mitsui Financial or generate 2.85% return on investment over 90 days.

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

Companhia de Fiacao  vs.  Sumitomo Mitsui Financial

Companhia de Fiacao

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia de Fiacao has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia and Sumitomo Mitsui

The main advantage of trading using opposite Companhia and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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 Companhia de Fiacao 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.