Correlation Between Coor Service and Sumitomo Chemical

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

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

Diversification Opportunities for Coor Service and Sumitomo Chemical

0.53

Correlation Coefficient

Coor Service  Sumitomo Chemical

Very weak diversification

The 3 months correlation between Coor and Sumitomo is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Coor Service Management and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Coor Service 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 Coor Service Management are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Coor Service i.e., Coor Service and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Coor Service and Sumitomo Chemical

Assuming the 90 days horizon Coor Service is expected to generate 1.09 times less return on investment than Sumitomo Chemical. In addition to that, Coor Service is 1.05 times more volatile than Sumitomo Chemical. It trades about 0.07 of its total potential returns per unit of risk. Sumitomo Chemical is currently generating about 0.08 per unit of volatility. If you would invest  197.00  in Sumitomo Chemical on December 29, 2024 and sell it today you would earn a total of  27.00  from holding Sumitomo Chemical or generate 13.71% return on investment over 90 days.

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

Coor Service Management  vs.  Sumitomo Chemical

Coor Service Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coor Service Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Coor Service reported solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Chemical

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Chemical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coor Service and Sumitomo Chemical

The main advantage of trading using opposite Coor Service and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coor Service position performs unexpectedly, Sumitomo Chemical 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 Chemical will offset losses from the drop in Sumitomo Chemical's long position.

The idea behind Coor Service Management and Sumitomo Chemical 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.