Correlation Between National Australia and Sumitomo Mitsui

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

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

Diversification Opportunities for National Australia and Sumitomo Mitsui

-0.44

Correlation Coefficient

National Australia  Sumitomo Mitsui

Very good diversification

The 3 months correlation between National and Sumitomo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial and National Australia 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 National Australia Bank 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 Financial has no effect on the direction of National Australia i.e., National Australia and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between National Australia and Sumitomo Mitsui

Assuming the 90 days horizon National Australia Bank is expected to under-perform the Sumitomo Mitsui. But the pink sheet apears to be less risky and, when comparing its historical volatility, National Australia Bank is 2.22 times less risky than Sumitomo Mitsui. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Sumitomo Mitsui Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,216  in Sumitomo Mitsui Financial on October 6, 2024 and sell it today you would earn a total of  296.00  from holding Sumitomo Mitsui Financial or generate 13.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.12%
Values	Daily Returns

National Australia Bank  vs.  Sumitomo Mitsui Financial

National Australia Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Australia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sumitomo Mitsui reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Australia and Sumitomo Mitsui

The main advantage of trading using opposite National Australia and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia 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 National Australia Bank and Sumitomo Mitsui Financial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.