Correlation Between Sumitomo Corp and CK Hutchison
Can any of the company-specific risk be diversified away by investing in both Sumitomo Corp and CK Hutchison 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 Corp and CK Hutchison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Corp ADR and CK Hutchison Holdings, you can compare the effects of market volatilities on Sumitomo Corp and CK Hutchison 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 Corp with a short position of CK Hutchison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Corp and CK Hutchison.
Diversification Opportunities for Sumitomo Corp and CK Hutchison
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and CKHUF is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Corp ADR and CK Hutchison Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CK Hutchison Holdings and Sumitomo Corp 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 Corp ADR are associated (or correlated) with CK Hutchison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CK Hutchison Holdings has no effect on the direction of Sumitomo Corp i.e., Sumitomo Corp and CK Hutchison go up and down completely randomly.
Pair Corralation between Sumitomo Corp and CK Hutchison
Assuming the 90 days horizon Sumitomo Corp is expected to generate 1.09 times less return on investment than CK Hutchison. But when comparing it to its historical volatility, Sumitomo Corp ADR is 2.12 times less risky than CK Hutchison. It trades about 0.08 of its potential returns per unit of risk. CK Hutchison Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 538.00 in CK Hutchison Holdings on December 30, 2024 and sell it today you would earn a total of 30.00 from holding CK Hutchison Holdings or generate 5.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 93.55% |
Values | Daily Returns |
Sumitomo Corp ADR vs. CK Hutchison Holdings
Performance |
Timeline |
Sumitomo Corp ADR |
CK Hutchison Holdings |
Sumitomo Corp and CK Hutchison Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sumitomo Corp and CK Hutchison
The main advantage of trading using opposite Sumitomo Corp and CK Hutchison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Corp position performs unexpectedly, CK Hutchison 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 CK Hutchison will offset losses from the drop in CK Hutchison's long position.Sumitomo Corp vs. Itochu Corp ADR | Sumitomo Corp vs. Mitsubishi Corp | Sumitomo Corp vs. ITOCHU | Sumitomo Corp vs. Marubeni Corp ADR |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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