Correlation Between Sumitomo Electric and Hesai Group

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

Diversification Opportunities for Sumitomo Electric and Hesai Group

-0.04

Correlation Coefficient

Sumitomo Electric  Hesai Group

Good diversification

The 3 months correlation between Sumitomo and Hesai is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Electric Industries and Hesai Group American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hesai Group American 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 Hesai Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hesai Group American has no effect on the direction of Sumitomo Electric i.e., Sumitomo Electric and Hesai Group go up and down completely randomly.

Pair Corralation between Sumitomo Electric and Hesai Group

Assuming the 90 days horizon Sumitomo Electric is expected to generate 12.25 times less return on investment than Hesai Group. But when comparing it to its historical volatility, Sumitomo Electric Industries is 3.25 times less risky than Hesai Group. It trades about 0.03 of its potential returns per unit of risk. Hesai Group American is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,313  in Hesai Group American on December 23, 2024 and sell it today you would earn a total of  527.00  from holding Hesai Group American or generate 40.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sumitomo Electric Industries  vs.  Hesai Group American

Sumitomo Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Electric Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sumitomo Electric is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hesai Group American

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hesai Group American are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Hesai Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sumitomo Electric and Hesai Group

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

The idea behind Sumitomo Electric Industries and Hesai Group American 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.