Correlation Between SIERRA METALS and Sumitomo Rubber

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

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

Diversification Opportunities for SIERRA METALS and Sumitomo Rubber

-0.57

Correlation Coefficient

SIERRA METALS  Sumitomo Rubber

Excellent diversification

The 3 months correlation between SIERRA and Sumitomo is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding SIERRA METALS and Sumitomo Rubber Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Rubber Indu and SIERRA METALS 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 SIERRA METALS are associated (or correlated) with Sumitomo Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Rubber Indu has no effect on the direction of SIERRA METALS i.e., SIERRA METALS and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between SIERRA METALS and Sumitomo Rubber

Assuming the 90 days trading horizon SIERRA METALS is expected to generate 10.15 times less return on investment than Sumitomo Rubber. In addition to that, SIERRA METALS is 2.1 times more volatile than Sumitomo Rubber Industries. It trades about 0.01 of its total potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.16 per unit of volatility. If you would invest  930.00  in Sumitomo Rubber Industries on October 7, 2024 and sell it today you would earn a total of  150.00  from holding Sumitomo Rubber Industries or generate 16.13% return on investment over 90 days.

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

SIERRA METALS  vs.  Sumitomo Rubber Industries

SIERRA METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SIERRA METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SIERRA METALS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Sumitomo Rubber Indu

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Rubber reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIERRA METALS and Sumitomo Rubber

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

The idea behind SIERRA METALS and Sumitomo Rubber Industries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..