Correlation Between Sumitomo Metal and Doubleview Gold

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

By analyzing existing cross correlation between Sumitomo Metal Mining and Doubleview Gold Corp, you can compare the effects of market volatilities on Sumitomo Metal and Doubleview Gold 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 Metal with a short position of Doubleview Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Metal and Doubleview Gold.

Diversification Opportunities for Sumitomo Metal and Doubleview Gold

-0.31

Correlation Coefficient

Sumitomo Metal  Doubleview Gold

Very good diversification

The 3 months correlation between Sumitomo and Doubleview is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Metal Mining and Doubleview Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doubleview Gold Corp and Sumitomo Metal 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 Metal Mining are associated (or correlated) with Doubleview Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doubleview Gold Corp has no effect on the direction of Sumitomo Metal i.e., Sumitomo Metal and Doubleview Gold go up and down completely randomly.

Pair Corralation between Sumitomo Metal and Doubleview Gold

Assuming the 90 days horizon Sumitomo Metal Mining is expected to under-perform the Doubleview Gold. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sumitomo Metal Mining is 2.8 times less risky than Doubleview Gold. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Doubleview Gold Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Doubleview Gold Corp on December 2, 2024 and sell it today you would earn a total of  13.00  from holding Doubleview Gold Corp or generate 54.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Sumitomo Metal Mining  vs.  Doubleview Gold Corp

Sumitomo Metal Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sumitomo Metal Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Doubleview Gold Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Doubleview Gold Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Doubleview Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Metal and Doubleview Gold

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

The idea behind Sumitomo Metal Mining and Doubleview Gold Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.