Correlation Between Fair Value and Sumitomo Mitsui

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

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

Diversification Opportunities for Fair Value and Sumitomo Mitsui

-0.3

Correlation Coefficient

Fair Value  Sumitomo Mitsui

Very good diversification

The 3 months correlation between Fair and Sumitomo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fair Value Reit 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 Fair Value 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 Fair Value Reit 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 Fair Value i.e., Fair Value and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Fair Value and Sumitomo Mitsui

Assuming the 90 days horizon Fair Value is expected to generate 21.89 times less return on investment than Sumitomo Mitsui. But when comparing it to its historical volatility, Fair Value Reit is 1.28 times less risky than Sumitomo Mitsui. It trades about 0.0 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  248.00  in Sumitomo Mitsui Construction on December 27, 2024 and sell it today you would earn a total of  10.00  from holding Sumitomo Mitsui Construction or generate 4.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Fair Value Reit  vs.  Sumitomo Mitsui Construction

Fair Value Reit

Risk-Adjusted Performance

Very Weak

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

Sumitomo Mitsui Cons

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fair Value and Sumitomo Mitsui

The main advantage of trading using opposite Fair Value and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Value 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 Fair Value Reit 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.