Correlation Between Sumitomo Mitsui and Barclays PLC
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Barclays PLC 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 Barclays PLC 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 Barclays PLC ADR, you can compare the effects of market volatilities on Sumitomo Mitsui and Barclays PLC 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 Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Barclays PLC.
Diversification Opportunities for Sumitomo Mitsui and Barclays PLC
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Barclays is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Financial and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Barclays PLC go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Barclays PLC
Assuming the 90 days horizon Sumitomo Mitsui Financial is expected to under-perform the Barclays PLC. In addition to that, Sumitomo Mitsui is 3.23 times more volatile than Barclays PLC ADR. It trades about -0.09 of its total potential returns per unit of risk. Barclays PLC ADR is currently generating about -0.24 per unit of volatility. If you would invest 1,367 in Barclays PLC ADR on October 15, 2024 and sell it today you would lose (98.00) from holding Barclays PLC ADR or give up 7.17% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Sumitomo Mitsui Financial vs. Barclays PLC ADR
Performance |
Timeline |
Sumitomo Mitsui Financial |
Barclays PLC ADR |
Sumitomo Mitsui and Barclays PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sumitomo Mitsui and Barclays PLC
The main advantage of trading using opposite Sumitomo Mitsui and Barclays PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Barclays PLC 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 Barclays PLC will offset losses from the drop in Barclays PLC's long position.Sumitomo Mitsui vs. Barclays PLC ADR | Sumitomo Mitsui vs. HSBC Holdings PLC | Sumitomo Mitsui vs. ING Group NV | Sumitomo Mitsui vs. Citigroup |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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