Correlation Between IQIYI and Sumitomo Electric

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

By analyzing existing cross correlation between iQIYI Inc and Sumitomo Electric Industries, you can compare the effects of market volatilities on IQIYI and Sumitomo Electric 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 IQIYI with a short position of Sumitomo Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of IQIYI and Sumitomo Electric.

Diversification Opportunities for IQIYI and Sumitomo Electric

0.37

Correlation Coefficient

IQIYI  Sumitomo Electric

Weak diversification

The 3 months correlation between IQIYI and Sumitomo is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding iQIYI Inc and Sumitomo Electric Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Electric and IQIYI 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 iQIYI Inc are associated (or correlated) with Sumitomo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Electric has no effect on the direction of IQIYI i.e., IQIYI and Sumitomo Electric go up and down completely randomly.

Pair Corralation between IQIYI and Sumitomo Electric

Allowing for the 90-day total investment horizon iQIYI Inc is expected to generate 1.46 times more return on investment than Sumitomo Electric. However, IQIYI is 1.46 times more volatile than Sumitomo Electric Industries. It trades about 0.04 of its potential returns per unit of risk. Sumitomo Electric Industries is currently generating about 0.02 per unit of risk. If you would invest  208.00  in iQIYI Inc on December 27, 2024 and sell it today you would earn a total of  13.00  from holding iQIYI Inc or generate 6.25% return on investment over 90 days.

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

iQIYI Inc  vs.  Sumitomo Electric Industries

iQIYI Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iQIYI Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IQIYI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sumitomo Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Electric Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sumitomo Electric is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IQIYI and Sumitomo Electric

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

The idea behind iQIYI Inc and Sumitomo Electric 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 Global Correlations module to find global opportunities by holding instruments from different markets.