Correlation Between Stepstone and SUMITOMO

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

By analyzing existing cross correlation between Stepstone Group and SUMITOMO MITSUI FINANCIAL, you can compare the effects of market volatilities on Stepstone and SUMITOMO 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 Stepstone with a short position of SUMITOMO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and SUMITOMO.

Diversification Opportunities for Stepstone and SUMITOMO

-0.56

Correlation Coefficient

Stepstone  SUMITOMO

Excellent diversification

The 3 months correlation between Stepstone and SUMITOMO is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and SUMITOMO MITSUI FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO MITSUI FINANCIAL and Stepstone 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 Stepstone Group are associated (or correlated) with SUMITOMO. 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 FINANCIAL has no effect on the direction of Stepstone i.e., Stepstone and SUMITOMO go up and down completely randomly.

Pair Corralation between Stepstone and SUMITOMO

Given the investment horizon of 90 days Stepstone Group is expected to generate 2.11 times more return on investment than SUMITOMO. However, Stepstone is 2.11 times more volatile than SUMITOMO MITSUI FINANCIAL. It trades about 0.12 of its potential returns per unit of risk. SUMITOMO MITSUI FINANCIAL is currently generating about -0.15 per unit of risk. If you would invest  5,385  in Stepstone Group on September 4, 2024 and sell it today you would earn a total of  900.00  from holding Stepstone Group or generate 16.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.63%
Values	Daily Returns

Stepstone Group  vs.  SUMITOMO MITSUI FINANCIAL

Stepstone Group

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

SUMITOMO MITSUI FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUMITOMO MITSUI FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for SUMITOMO MITSUI FINANCIAL investors.

Pair Trading with Stepstone and SUMITOMO

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

The idea behind Stepstone Group and SUMITOMO MITSUI FINANCIAL 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.