Correlation Between Dupont De and SUMITOMO

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

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

Diversification Opportunities for Dupont De and SUMITOMO

0.32

Correlation Coefficient

Dupont De  SUMITOMO

Weak diversification

The 3 months correlation between Dupont and SUMITOMO is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and SUMITOMO go up and down completely randomly.

Pair Corralation between Dupont De and SUMITOMO

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the SUMITOMO. In addition to that, Dupont De is 4.57 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about -0.02 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  8,555  in SUMITOMO MITSUI FINANCIAL on December 31, 2024 and sell it today you would earn a total of  61.00  from holding SUMITOMO MITSUI FINANCIAL or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

Dupont De Nemours  vs.  SUMITOMO MITSUI FINANCIAL

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO MITSUI FINANCIAL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SUMITOMO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dupont De and SUMITOMO

The main advantage of trading using opposite Dupont De and SUMITOMO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Global Correlations module to find global opportunities by holding instruments from different markets.