Correlation Between Sumitomo Corp and Fosun International

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

Diversification Opportunities for Sumitomo Corp and Fosun International

-0.2

Correlation Coefficient

Sumitomo Corp  Fosun International

Good diversification

The 3 months correlation between Sumitomo and Fosun is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Corp ADR and Fosun International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fosun International 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 Fosun International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fosun International has no effect on the direction of Sumitomo Corp i.e., Sumitomo Corp and Fosun International go up and down completely randomly.

Pair Corralation between Sumitomo Corp and Fosun International

Assuming the 90 days horizon Sumitomo Corp is expected to generate 2.66 times less return on investment than Fosun International. But when comparing it to its historical volatility, Sumitomo Corp ADR is 2.25 times less risky than Fosun International. It trades about 0.19 of its potential returns per unit of risk. Fosun International is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Fosun International on November 27, 2024 and sell it today you would earn a total of  10.00  from holding Fosun International or generate 22.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Sumitomo Corp ADR  vs.  Fosun International

Sumitomo Corp ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sumitomo Corp ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Sumitomo Corp may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Fosun International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fosun International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fosun International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sumitomo Corp and Fosun International

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

The idea behind Sumitomo Corp ADR and Fosun International 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.