Correlation Between METTLER TOLEDO and Sumitomo Mitsui

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

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

Diversification Opportunities for METTLER TOLEDO and Sumitomo Mitsui

0.7

Correlation Coefficient

METTLER TOLEDO  Sumitomo Mitsui

Poor diversification

The 3 months correlation between METTLER and Sumitomo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding METTLER TOLEDO INTL and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons and METTLER TOLEDO 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 METTLER TOLEDO INTL 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 Cons has no effect on the direction of METTLER TOLEDO i.e., METTLER TOLEDO and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between METTLER TOLEDO and Sumitomo Mitsui

Assuming the 90 days trading horizon METTLER TOLEDO INTL is expected to generate 0.73 times more return on investment than Sumitomo Mitsui. However, METTLER TOLEDO INTL is 1.36 times less risky than Sumitomo Mitsui. It trades about 0.08 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about 0.04 per unit of risk. If you would invest  117,650  in METTLER TOLEDO INTL on November 28, 2024 and sell it today you would earn a total of  6,850  from holding METTLER TOLEDO INTL or generate 5.82% return on investment over 90 days.

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

METTLER TOLEDO INTL  vs.  Sumitomo Mitsui Construction

METTLER TOLEDO INTL

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in METTLER TOLEDO INTL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, METTLER TOLEDO may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Sumitomo Mitsui Cons

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sumitomo Mitsui is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with METTLER TOLEDO and Sumitomo Mitsui

The main advantage of trading using opposite METTLER TOLEDO and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METTLER TOLEDO 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 METTLER TOLEDO INTL and Sumitomo Mitsui Construction 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.