Correlation Between Intel and SUMITOMO

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

By analyzing existing cross correlation between Intel and SUMITOMO MITSUI FINANCIAL, you can compare the effects of market volatilities on Intel and SUMITOMO 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 Intel with a short position of SUMITOMO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and SUMITOMO.

Diversification Opportunities for Intel and SUMITOMO

0.46

Correlation Coefficient

Intel  SUMITOMO

Very weak diversification

The 3 months correlation between Intel and SUMITOMO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Intel and SUMITOMO MITSUI FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO MITSUI FINANCIAL and Intel 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 Intel are associated (or correlated) with SUMITOMO. 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 FINANCIAL has no effect on the direction of Intel i.e., Intel and SUMITOMO go up and down completely randomly.

Pair Corralation between Intel and SUMITOMO

Given the investment horizon of 90 days Intel is expected to generate 13.86 times more return on investment than SUMITOMO. However, Intel is 13.86 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about 0.01 of its potential returns per unit of risk. SUMITOMO MITSUI FINANCIAL is currently generating about -0.05 per unit of risk. If you would invest  2,393  in Intel on December 2, 2024 and sell it today you would lose (20.00) from holding Intel or give up 0.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Intel  vs.  SUMITOMO MITSUI FINANCIAL

Intel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Intel is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUMITOMO MITSUI FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SUMITOMO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intel and SUMITOMO

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

The idea behind Intel and SUMITOMO MITSUI FINANCIAL 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.