Correlation Between RCM Technologies and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both RCM Technologies 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 RCM Technologies and Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RCM Technologies and Sumitomo Mitsui Trust, you can compare the effects of market volatilities on RCM Technologies 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 RCM Technologies with a short position of Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCM Technologies and Sumitomo Mitsui.
Diversification Opportunities for RCM Technologies and Sumitomo Mitsui
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RCM and Sumitomo is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding RCM Technologies 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 RCM Technologies 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 RCM Technologies 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 RCM Technologies i.e., RCM Technologies and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between RCM Technologies and Sumitomo Mitsui
Given the investment horizon of 90 days RCM Technologies is expected to under-perform the Sumitomo Mitsui. But the stock apears to be less risky and, when comparing its historical volatility, RCM Technologies is 2.7 times less risky than Sumitomo Mitsui. The stock trades about -0.14 of its potential returns per unit of risk. The Sumitomo Mitsui Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,230 in Sumitomo Mitsui Trust on September 26, 2024 and sell it today you would lose (35.00) from holding Sumitomo Mitsui Trust or give up 1.57% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
RCM Technologies vs. Sumitomo Mitsui Trust
Performance |
Timeline |
RCM Technologies |
Sumitomo Mitsui Trust |
RCM Technologies and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with RCM Technologies and Sumitomo Mitsui
The main advantage of trading using opposite RCM Technologies and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCM Technologies 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.RCM Technologies vs. Matthews International | RCM Technologies vs. Mammoth Energy Services | RCM Technologies vs. Griffon | RCM Technologies vs. Steel Partners Holdings |
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Check out your portfolio center.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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