Correlation Between COMMERCIAL VEHICLE and Sumitomo Mitsui

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

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

Diversification Opportunities for COMMERCIAL VEHICLE and Sumitomo Mitsui

-0.1

Correlation Coefficient

COMMERCIAL VEHICLE  Sumitomo Mitsui

Good diversification

The 3 months correlation between COMMERCIAL and Sumitomo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 Cons has no effect on the direction of COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between COMMERCIAL VEHICLE and Sumitomo Mitsui

Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the Sumitomo Mitsui. In addition to that, COMMERCIAL VEHICLE is 2.86 times more volatile than Sumitomo Mitsui Construction. It trades about -0.09 of its total potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about 0.06 per unit of volatility. If you would invest  220.00  in Sumitomo Mitsui Construction on October 4, 2024 and sell it today you would earn a total of  24.00  from holding Sumitomo Mitsui Construction or generate 10.91% return on investment over 90 days.

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

COMMERCIAL VEHICLE  vs.  Sumitomo Mitsui Construction

COMMERCIAL VEHICLE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMMERCIAL VEHICLE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sumitomo Mitsui Cons

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with COMMERCIAL VEHICLE and Sumitomo Mitsui

The main advantage of trading using opposite COMMERCIAL VEHICLE and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE and Sumitomo Mitsui Construction 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.