Correlation Between Plastic Omnium and Sumitomo Rubber

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

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

Diversification Opportunities for Plastic Omnium and Sumitomo Rubber

0.24

Correlation Coefficient

Plastic Omnium  Sumitomo Rubber

Modest diversification

The 3 months correlation between Plastic and Sumitomo is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium i.e., Plastic Omnium and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between Plastic Omnium and Sumitomo Rubber

Assuming the 90 days trading horizon Plastic Omnium is expected to generate 1.57 times more return on investment than Sumitomo Rubber. However, Plastic Omnium is 1.57 times more volatile than Sumitomo Rubber Industries. It trades about 0.42 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.01 per unit of risk. If you would invest  799.00  in Plastic Omnium on September 23, 2024 and sell it today you would earn a total of  178.00  from holding Plastic Omnium or generate 22.28% return on investment over 90 days.

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

Plastic Omnium  vs.  Sumitomo Rubber Industries

Plastic Omnium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic Omnium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Plastic Omnium unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sumitomo Rubber Indu

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sumitomo Rubber may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Plastic Omnium and Sumitomo Rubber

The main advantage of trading using opposite Plastic Omnium and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastic Omnium 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 Plastic Omnium 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.