Correlation Between China BlueChemical and SUMITOMO P

Can any of the company-specific risk be diversified away by investing in both China BlueChemical and SUMITOMO P 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 P 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 P SP, you can compare the effects of market volatilities on China BlueChemical and SUMITOMO P 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 P. Check out your portfolio center. Please also check ongoing floating volatility patterns of China BlueChemical and SUMITOMO P.

Diversification Opportunities for China BlueChemical and SUMITOMO P

-0.44

Correlation Coefficient

China BlueChemical  SUMITOMO P

Very good diversification

The 3 months correlation between China and SUMITOMO is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding China BlueChemical and SUMITOMO P SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO P SP 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 P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO P SP has no effect on the direction of China BlueChemical i.e., China BlueChemical and SUMITOMO P go up and down completely randomly.

Pair Corralation between China BlueChemical and SUMITOMO P

Assuming the 90 days horizon China BlueChemical is expected to under-perform the SUMITOMO P. In addition to that, China BlueChemical is 1.45 times more volatile than SUMITOMO P SP. It trades about -0.07 of its total potential returns per unit of risk. SUMITOMO P SP is currently generating about 0.07 per unit of volatility. If you would invest  2,040  in SUMITOMO P SP on December 29, 2024 and sell it today you would earn a total of  180.00  from holding SUMITOMO P SP or generate 8.82% return on investment over 90 days.

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

China BlueChemical  vs.  SUMITOMO P SP

China BlueChemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days China BlueChemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SUMITOMO P SP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO P SP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, SUMITOMO P may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China BlueChemical and SUMITOMO P

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

The idea behind China BlueChemical and SUMITOMO P SP 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.