Correlation Between Sumitomo Electric and Gentex

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

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

Diversification Opportunities for Sumitomo Electric and Gentex

0.32

Correlation Coefficient

Sumitomo Electric  Gentex

Weak diversification

The 3 months correlation between Sumitomo and Gentex is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Electric Industries and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex and Sumitomo Electric 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 Electric Industries are associated (or correlated) with Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Sumitomo Electric i.e., Sumitomo Electric and Gentex go up and down completely randomly.

Pair Corralation between Sumitomo Electric and Gentex

Assuming the 90 days horizon Sumitomo Electric is expected to generate 1.03 times less return on investment than Gentex. In addition to that, Sumitomo Electric is 1.71 times more volatile than Gentex. It trades about 0.07 of its total potential returns per unit of risk. Gentex is currently generating about 0.13 per unit of volatility. If you would invest  2,961  in Gentex on September 17, 2024 and sell it today you would earn a total of  98.00  from holding Gentex or generate 3.31% return on investment over 90 days.

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

Sumitomo Electric Industries  vs.  Gentex

Sumitomo Electric

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Electric Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Sumitomo Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Gentex

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Gentex 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 Electric and Gentex

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

The idea behind Sumitomo Electric Industries and Gentex 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.