Correlation Between SoundHound and Sumco Corp

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

By analyzing existing cross correlation between SoundHound AI and Sumco Corp ADR, you can compare the effects of market volatilities on SoundHound and Sumco Corp 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 SoundHound with a short position of Sumco Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and Sumco Corp.

Diversification Opportunities for SoundHound and Sumco Corp

-0.44

Correlation Coefficient

SoundHound  Sumco Corp

Very good diversification

The 3 months correlation between SoundHound and Sumco is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and Sumco Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumco Corp ADR and SoundHound 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 SoundHound AI are associated (or correlated) with Sumco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumco Corp ADR has no effect on the direction of SoundHound i.e., SoundHound and Sumco Corp go up and down completely randomly.

Pair Corralation between SoundHound and Sumco Corp

Given the investment horizon of 90 days SoundHound AI is expected to generate 2.91 times more return on investment than Sumco Corp. However, SoundHound is 2.91 times more volatile than Sumco Corp ADR. It trades about 0.08 of its potential returns per unit of risk. Sumco Corp ADR is currently generating about -0.03 per unit of risk. If you would invest  183.00  in SoundHound AI on December 5, 2024 and sell it today you would earn a total of  789.00  from holding SoundHound AI or generate 431.15% return on investment over 90 days.

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

SoundHound AI  vs.  Sumco Corp ADR

SoundHound AI

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoundHound AI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sumco Corp ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sumco Corp ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sumco Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SoundHound and Sumco Corp

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

The idea behind SoundHound AI and Sumco Corp ADR 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.