Correlation Between Marubeni and SUMITOMO P

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

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

Diversification Opportunities for Marubeni and SUMITOMO P

0.21

Correlation Coefficient

Marubeni  SUMITOMO P

Modest diversification

The 3 months correlation between Marubeni and SUMITOMO is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni 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 Marubeni 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 Marubeni 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 Marubeni i.e., Marubeni and SUMITOMO P go up and down completely randomly.

Pair Corralation between Marubeni and SUMITOMO P

Assuming the 90 days trading horizon Marubeni is expected to under-perform the SUMITOMO P. But the stock apears to be less risky and, when comparing its historical volatility, Marubeni is 1.13 times less risky than SUMITOMO P. The stock trades about -0.15 of its potential returns per unit of risk. The SUMITOMO P SP is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,950  in SUMITOMO P SP on September 19, 2024 and sell it today you would earn a total of  40.00  from holding SUMITOMO P SP or generate 2.05% return on investment over 90 days.

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

Marubeni  vs.  SUMITOMO P SP

Marubeni

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marubeni has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Marubeni is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SUMITOMO P SP

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO P SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SUMITOMO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Marubeni and SUMITOMO P

The main advantage of trading using opposite Marubeni and SUMITOMO P positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marubeni 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 Marubeni 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.