Correlation Between Sumitomo Chemical and Asahi Kasei

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

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

Diversification Opportunities for Sumitomo Chemical and Asahi Kasei

0.0

Correlation Coefficient

Sumitomo Chemical  Asahi Kasei

Pay attention - limited upside

The 3 months correlation between Sumitomo and Asahi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Chemical Co and Asahi Kasei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asahi Kasei and Sumitomo Chemical 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 Chemical Co are associated (or correlated) with Asahi Kasei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asahi Kasei has no effect on the direction of Sumitomo Chemical i.e., Sumitomo Chemical and Asahi Kasei go up and down completely randomly.

Pair Corralation between Sumitomo Chemical and Asahi Kasei

If you would invest  1,095  in Sumitomo Chemical Co on December 30, 2024 and sell it today you would earn a total of  137.00  from holding Sumitomo Chemical Co or generate 12.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sumitomo Chemical Co  vs.  Asahi Kasei

Sumitomo Chemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Chemical Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Sumitomo Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Asahi Kasei

Risk-Adjusted Performance

Very Weak

Over the last 90 days Asahi Kasei has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Asahi Kasei is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sumitomo Chemical and Asahi Kasei

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

The idea behind Sumitomo Chemical Co and Asahi Kasei 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..