Correlation Between China BlueChemical and Sumitomo Rubber

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Can any of the company-specific risk be diversified away by investing in both China BlueChemical 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 China BlueChemical and Sumitomo Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China BlueChemical and Sumitomo Rubber Industries, you can compare the effects of market volatilities on China BlueChemical 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 China BlueChemical with a short position of Sumitomo Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of China BlueChemical and Sumitomo Rubber.

Diversification Opportunities for China BlueChemical and Sumitomo Rubber

ChinaSumitomoDiversified AwayChinaSumitomoDiversified Away100%
0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between China and Sumitomo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical 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 China BlueChemical 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 China BlueChemical 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 China BlueChemical i.e., China BlueChemical and Sumitomo Rubber go up and down completely randomly.

Pair Corralation between China BlueChemical and Sumitomo Rubber

Assuming the 90 days horizon China BlueChemical is expected to generate 3.49 times more return on investment than Sumitomo Rubber. However, China BlueChemical is 3.49 times more volatile than Sumitomo Rubber Industries. It trades about 0.18 of its potential returns per unit of risk. Sumitomo Rubber Industries is currently generating about 0.1 per unit of risk. If you would invest  24.00  in China BlueChemical on October 26, 2024 and sell it today you would earn a total of  3.00  from holding China BlueChemical or generate 12.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy94.74%
ValuesDaily Returns

China BlueChemical  vs.  Sumitomo Rubber Industries

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -505101520
JavaScript chart by amCharts 3.21.15H1Q 108
       Timeline  
China BlueChemical 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in China BlueChemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China BlueChemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan0.230.240.250.260.270.280.29
Sumitomo Rubber Indu 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Rubber Industries are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sumitomo Rubber reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan99.51010.5

China BlueChemical and Sumitomo Rubber Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-10.43-7.81-5.19-2.580.04362.65.287.9710.6613.34 0.050.100.15
JavaScript chart by amCharts 3.21.15H1Q 108
       Returns  

Pair Trading with China BlueChemical and Sumitomo Rubber

The main advantage of trading using opposite China BlueChemical and Sumitomo Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China BlueChemical 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 China BlueChemical 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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