Correlation Between Sumitomo Mitsui and Suzano SA

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

Diversification Opportunities for Sumitomo Mitsui and Suzano SA

0.9

Correlation Coefficient

Sumitomo Mitsui  Suzano SA

Almost no diversification

The 3 months correlation between Sumitomo and Suzano is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Suzano SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzano SA 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 Suzano SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzano SA has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Suzano SA go up and down completely randomly.

Pair Corralation between Sumitomo Mitsui and Suzano SA

Assuming the 90 days trading horizon Sumitomo Mitsui is expected to generate 1.05 times less return on investment than Suzano SA. In addition to that, Sumitomo Mitsui is 1.15 times more volatile than Suzano SA. It trades about 0.13 of its total potential returns per unit of risk. Suzano SA is currently generating about 0.15 per unit of volatility. If you would invest  5,738  in Suzano SA on September 27, 2024 and sell it today you would earn a total of  386.00  from holding Suzano SA or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Sumitomo Mitsui Financial  vs.  Suzano SA

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.

Suzano SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suzano SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Suzano SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Mitsui and Suzano SA

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

The idea behind Sumitomo Mitsui Financial and Suzano 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.