Correlation Between Secom Co and Sumitomo Mitsui

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

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

Diversification Opportunities for Secom Co and Sumitomo Mitsui

0.21

Correlation Coefficient

Secom Co  Sumitomo Mitsui

Modest diversification

The 3 months correlation between Secom and Sumitomo is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Secom Co Ltd and Sumitomo Mitsui Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Trust and Secom Co 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 Secom Co Ltd are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Trust has no effect on the direction of Secom Co i.e., Secom Co and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Secom Co and Sumitomo Mitsui

Assuming the 90 days horizon Secom Co Ltd is expected to under-perform the Sumitomo Mitsui. But the pink sheet apears to be less risky and, when comparing its historical volatility, Secom Co Ltd is 1.38 times less risky than Sumitomo Mitsui. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Sumitomo Mitsui Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  497.00  in Sumitomo Mitsui Trust on September 13, 2024 and sell it today you would earn a total of  13.00  from holding Sumitomo Mitsui Trust or generate 2.62% return on investment over 90 days.

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

Secom Co Ltd  vs.  Sumitomo Mitsui Trust

Secom Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sumitomo Mitsui Trust

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Secom Co and Sumitomo Mitsui

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

The idea behind Secom Co Ltd and Sumitomo Mitsui Trust 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.