Correlation Between Daiwa Securities and Sumitomo Mitsui

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

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

Diversification Opportunities for Daiwa Securities and Sumitomo Mitsui

0.08

Correlation Coefficient

Daiwa Securities  Sumitomo Mitsui

Significant diversification

The 3 months correlation between Daiwa and Sumitomo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Daiwa Securities Group and Sumitomo Mitsui Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Trust and Daiwa Securities 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 Daiwa Securities Group are associated (or correlated) with Sumitomo Mitsui. 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 Trust has no effect on the direction of Daiwa Securities i.e., Daiwa Securities and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Daiwa Securities and Sumitomo Mitsui

Assuming the 90 days horizon Daiwa Securities Group is expected to generate 1.54 times more return on investment than Sumitomo Mitsui. However, Daiwa Securities is 1.54 times more volatile than Sumitomo Mitsui Trust. It trades about 0.04 of its potential returns per unit of risk. Sumitomo Mitsui Trust is currently generating about 0.04 per unit of risk. If you would invest  466.00  in Daiwa Securities Group on October 23, 2024 and sell it today you would earn a total of  210.00  from holding Daiwa Securities Group or generate 45.06% return on investment over 90 days.

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

Daiwa Securities Group  vs.  Sumitomo Mitsui Trust

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Daiwa Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sumitomo Mitsui Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sumitomo Mitsui may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Daiwa Securities and Sumitomo Mitsui

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

The idea behind Daiwa Securities Group and Sumitomo Mitsui Trust 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 Stocks Directory module to find actively traded stocks across global markets.