Correlation Between Sumitomo Mitsui and Applied Materials,

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

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

Diversification Opportunities for Sumitomo Mitsui and Applied Materials,

-0.33

Correlation Coefficient

Sumitomo Mitsui  Applied Materials,

Very good diversification

The 3 months correlation between Sumitomo and Applied is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Applied Materials, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials, and Sumitomo Mitsui 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 Sumitomo Mitsui Financial are associated (or correlated) with Applied Materials,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials, has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Applied Materials, go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Applied Materials,

Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.7 times more return on investment than Applied Materials,. However, Sumitomo Mitsui Financial is 1.43 times less risky than Applied Materials,. It trades about 0.2 of its potential returns per unit of risk. Applied Materials, is currently generating about -0.01 per unit of risk. If you would invest  7,105  in Sumitomo Mitsui Financial on October 7, 2024 and sell it today you would earn a total of  1,867  from holding Sumitomo Mitsui Financial or generate 26.28% return on investment over 90 days.

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

Sumitomo Mitsui Financial  vs.  Applied Materials,

Sumitomo Mitsui Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Sumitomo Mitsui sustained solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Applied Materials, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sumitomo Mitsui and Applied Materials,

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

The idea behind Sumitomo Mitsui Financial and Applied Materials, 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.