Correlation Between Cheniere Energy and SUMITOMO

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

By analyzing existing cross correlation between Cheniere Energy Partners and SUMITOMO MITSUI FINANCIAL, you can compare the effects of market volatilities on Cheniere Energy and SUMITOMO 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 Cheniere Energy with a short position of SUMITOMO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and SUMITOMO.

Diversification Opportunities for Cheniere Energy and SUMITOMO

-0.74

Correlation Coefficient

Cheniere Energy  SUMITOMO

Pay attention - limited upside

The 3 months correlation between Cheniere and SUMITOMO is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners 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 Cheniere Energy 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 Cheniere Energy Partners are associated (or correlated) with SUMITOMO. 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 Cheniere Energy i.e., Cheniere Energy and SUMITOMO go up and down completely randomly.

Pair Corralation between Cheniere Energy and SUMITOMO

Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 2.03 times more return on investment than SUMITOMO. However, Cheniere Energy is 2.03 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about 0.27 of its potential returns per unit of risk. SUMITOMO MITSUI FINANCIAL is currently generating about -0.16 per unit of risk. If you would invest  4,674  in Cheniere Energy Partners on September 5, 2024 and sell it today you would earn a total of  1,129  from holding Cheniere Energy Partners or generate 24.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.38%
Values	Daily Returns

Cheniere Energy Partners  vs.  SUMITOMO MITSUI FINANCIAL

Cheniere Energy Partners

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUMITOMO MITSUI FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SUMITOMO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheniere Energy and SUMITOMO

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

The idea behind Cheniere Energy Partners 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.