Correlation Between Ortel Communications and Sumitomo Chemical

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

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

Diversification Opportunities for Ortel Communications and Sumitomo Chemical

0.54

Correlation Coefficient

Ortel Communications  Sumitomo Chemical

Very weak diversification

The 3 months correlation between Ortel and Sumitomo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ortel Communications Limited and Sumitomo Chemical India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical India and Ortel Communications 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 Ortel Communications Limited 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 India has no effect on the direction of Ortel Communications i.e., Ortel Communications and Sumitomo Chemical go up and down completely randomly.

Pair Corralation between Ortel Communications and Sumitomo Chemical

Assuming the 90 days trading horizon Ortel Communications Limited is expected to under-perform the Sumitomo Chemical. In addition to that, Ortel Communications is 1.39 times more volatile than Sumitomo Chemical India. It trades about -0.08 of its total potential returns per unit of risk. Sumitomo Chemical India is currently generating about 0.02 per unit of volatility. If you would invest  52,660  in Sumitomo Chemical India on December 26, 2024 and sell it today you would earn a total of  750.00  from holding Sumitomo Chemical India or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Ortel Communications Limited  vs.  Sumitomo Chemical India

Ortel Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ortel Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sumitomo Chemical India

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Sumitomo Chemical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ortel Communications and Sumitomo Chemical

The main advantage of trading using opposite Ortel Communications and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ortel Communications 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 Ortel Communications Limited and Sumitomo Chemical India 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..