Correlation Between MSAD Insurance and Sumitomo Mitsui

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

By analyzing existing cross correlation between MSAD Insurance Group and Sumitomo Mitsui Trust, you can compare the effects of market volatilities on MSAD Insurance and Sumitomo Mitsui 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 MSAD Insurance with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSAD Insurance and Sumitomo Mitsui.

Diversification Opportunities for MSAD Insurance and Sumitomo Mitsui

0.34

Correlation Coefficient

MSAD Insurance  Sumitomo Mitsui

Weak diversification

The 3 months correlation between MSAD and Sumitomo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding MSAD Insurance Group and Sumitomo Mitsui Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Trust and MSAD Insurance 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 MSAD Insurance Group are associated (or correlated) with Sumitomo Mitsui. 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 Trust has no effect on the direction of MSAD Insurance i.e., MSAD Insurance and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between MSAD Insurance and Sumitomo Mitsui

Assuming the 90 days horizon MSAD Insurance is expected to generate 2.2 times less return on investment than Sumitomo Mitsui. In addition to that, MSAD Insurance is 1.07 times more volatile than Sumitomo Mitsui Trust. It trades about 0.07 of its total potential returns per unit of risk. Sumitomo Mitsui Trust is currently generating about 0.17 per unit of volatility. If you would invest  473.00  in Sumitomo Mitsui Trust on December 26, 2024 and sell it today you would earn a total of  64.00  from holding Sumitomo Mitsui Trust or generate 13.53% return on investment over 90 days.

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

MSAD Insurance Group  vs.  Sumitomo Mitsui Trust

MSAD Insurance Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MSAD Insurance Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, MSAD Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sumitomo Mitsui Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Sumitomo Mitsui showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MSAD Insurance and Sumitomo Mitsui

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

The idea behind MSAD Insurance Group and Sumitomo Mitsui Trust 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.