Correlation Between Lsb Industries and Sumitomo Chemical

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

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

Diversification Opportunities for Lsb Industries and Sumitomo Chemical

-0.76

Correlation Coefficient

Lsb Industries  Sumitomo Chemical

Pay attention - limited upside

The 3 months correlation between Lsb and Sumitomo is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lsb Industries and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical and Lsb Industries 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 Lsb Industries are associated (or correlated) with Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Lsb Industries i.e., Lsb Industries and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Lsb Industries and Sumitomo Chemical

Considering the 90-day investment horizon Lsb Industries is expected to under-perform the Sumitomo Chemical. In addition to that, Lsb Industries is 1.93 times more volatile than Sumitomo Chemical Co. It trades about -0.03 of its total potential returns per unit of risk. Sumitomo Chemical Co is currently generating about 0.09 per unit of volatility. If you would invest  1,095  in Sumitomo Chemical Co on December 28, 2024 and sell it today you would earn a total of  113.00  from holding Sumitomo Chemical Co or generate 10.32% return on investment over 90 days.

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

Lsb Industries  vs.  Sumitomo Chemical Co

Lsb Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lsb Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lsb Industries is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Sumitomo Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Sumitomo Chemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lsb Industries and Sumitomo Chemical

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

The idea behind Lsb Industries and Sumitomo Chemical Co 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.