Correlation Between Sumitomo Dainippon and Procyon

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

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

Diversification Opportunities for Sumitomo Dainippon and Procyon

0.07

Correlation Coefficient

Sumitomo Dainippon  Procyon

Significant diversification

The 3 months correlation between Sumitomo and Procyon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Dainippon Pharma and Procyon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procyon and Sumitomo Dainippon 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 Sumitomo Dainippon Pharma are associated (or correlated) with Procyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procyon has no effect on the direction of Sumitomo Dainippon i.e., Sumitomo Dainippon and Procyon go up and down completely randomly.

Pair Corralation between Sumitomo Dainippon and Procyon

Assuming the 90 days horizon Sumitomo Dainippon Pharma is expected to under-perform the Procyon. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Dainippon Pharma is 1.63 times less risky than Procyon. The pink sheet trades about -0.59 of its potential returns per unit of risk. The Procyon is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Procyon on October 7, 2024 and sell it today you would lose (8.00) from holding Procyon or give up 29.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.03%
Values	Daily Returns

Sumitomo Dainippon Pharma  vs.  Procyon

Sumitomo Dainippon Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sumitomo Dainippon Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sumitomo Dainippon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Procyon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procyon 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 very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sumitomo Dainippon and Procyon

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

The idea behind Sumitomo Dainippon Pharma and Procyon 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.