Correlation Between Sumitomo Mitsui and Prologis

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

Diversification Opportunities for Sumitomo Mitsui and Prologis

-0.16

Correlation Coefficient

Sumitomo Mitsui  Prologis

Good diversification

The 3 months correlation between Sumitomo and Prologis is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Prologis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prologis 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 Prologis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prologis has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Prologis go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Prologis

Assuming the 90 days trading horizon Sumitomo Mitsui Financial is expected to generate 1.29 times more return on investment than Prologis. However, Sumitomo Mitsui is 1.29 times more volatile than Prologis. It trades about 0.09 of its potential returns per unit of risk. Prologis is currently generating about 0.01 per unit of risk. If you would invest  4,427  in Sumitomo Mitsui Financial on October 24, 2024 and sell it today you would earn a total of  4,411  from holding Sumitomo Mitsui Financial or generate 99.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.78%
Values	Daily Returns

Sumitomo Mitsui Financial  vs.  Prologis

Sumitomo Mitsui Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Mitsui Financial are ranked lower than 16 (%) 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.

Prologis

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prologis are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Prologis 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 Prologis

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

The idea behind Sumitomo Mitsui Financial and Prologis 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.