Correlation Between Sumitomo Mitsui and Fertilizantes Heringer

Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Fertilizantes Heringer 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 Fertilizantes Heringer 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 Fertilizantes Heringer SA, you can compare the effects of market volatilities on Sumitomo Mitsui and Fertilizantes Heringer 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 Fertilizantes Heringer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Fertilizantes Heringer.

Diversification Opportunities for Sumitomo Mitsui and Fertilizantes Heringer

-0.65

Correlation Coefficient

Sumitomo Mitsui  Fertilizantes Heringer

Excellent diversification

The 3 months correlation between Sumitomo and Fertilizantes is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Fertilizantes Heringer SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fertilizantes Heringer 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 Fertilizantes Heringer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fertilizantes Heringer has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Fertilizantes Heringer go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Fertilizantes Heringer

Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 0.79 times more return on investment than Fertilizantes Heringer. However, Sumitomo Mitsui Financial is 1.26 times less risky than Fertilizantes Heringer. It trades about 0.38 of its potential returns per unit of risk. Fertilizantes Heringer SA is currently generating about -0.25 per unit of risk. If you would invest  7,378  in Sumitomo Mitsui Financial on September 1, 2024 and sell it today you would earn a total of  1,034  from holding Sumitomo Mitsui Financial or generate 14.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Sumitomo Mitsui Financial  vs.  Fertilizantes Heringer SA

Sumitomo Mitsui Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain primary indicators, Sumitomo Mitsui sustained solid returns over the last few months and may actually be approaching a breakup point.

Fertilizantes Heringer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fertilizantes Heringer SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sumitomo Mitsui and Fertilizantes Heringer

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

The idea behind Sumitomo Mitsui Financial and Fertilizantes Heringer SA 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.